Ontario Grain Farmer October 2021

25 ONTARIO GRAIN FARMER OCTOBER 2021 Notes to the Financial Statements For the year ended May 31, 2021 1. ACT OF INCORPORATION AND MANDATE Grain Farmers of Ontario is incorporated under the regulations of the Farm Products Marketing Act. The association was formed to represent producers of corn, soybeans and wheat in the Province of Ontario. On July 1, 2015, the regulations were amended to include producers of barley and oats. The association is a non profit organization under the Income Tax Act and, accordingly, is exempt from income taxes under Section 149 (1)(e) of the Income Tax Act. 2. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES These financial statements have been prepared in accordance with Canadian accounting standards for not for profit organizations. Summarized below are the policies considered significant for Grain Farmers of Ontario. REVENUE Revenue from wheat sales is recognized in the accounts under the terms and value defined in the sales contract. Sales are recognized when the contract has been signed and the inventory has been committed. License fee revenue is recognized on the date of sale. Grant and partner funding revenue is recognized when the corresponding research expense has been incurred. Interest is recognized as revenue when earned. All remaining revenue is recognized as earned and collection is reasonably assured. INVENTORY The wheat inventories are valued at the net realizable value, which is the estimated selling price less the estimated costs necessary to make the sale. CAPITAL ASSETS Capital assets are recorded at cost. Amortization is calculated using the following rates and methods: Building 4% declining balance Office furniture and fixtures 5 year straight-line Computer equipment 3 year straight-line Equipment 3 year straight-line Lab equipment 8 year straight-line Passenger vehicle and trailers 4 year straight-line IMPAIRMENT OF LONG LIVED ASSETS Long lived assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss is recognized when the carrying value exceeds the total undiscounted cash flows expected from their use and eventual disposition. The amount of the impairment loss is determined as the excess of the carrying value of the asset over its fair value. DEFERRED REVENUE Deferred revenue represents research grants received in advance relating to expenses for a future year. The revenue has been deferred and will be recognized in the appropriate fiscal year as the related expenses are incurred. FOREIGN CURRENCY TRANSLATION Purchased futures contracts are translated into Canadian dollars at exchange rates prevailing at the date of purchase. Gains and losses generated through the liquidation of futures and options are translated into Canadian dollars at exchange rates prevailing at the date of liquidation. Exchange adjustments resulting from the translation of these transactions are allocated to the appropriate pool account. Other income and expenses are translated at the daily exchange rates in effect during the year. Monetary assets and liabilities denominated in United States dollars are translated at the exchange rate in effect at the statement of financial position date. Exchange adjustments arising from conversion of foreign currency denominated 2. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) monetary assets or liabilities are recorded in appropriate pool or forward contract accounts. FINANCIAL INSTRUMENTS Measurement of financial instruments The association initially measures its financial assets and liabilities at fair value. The association subsequently measures all its financial assets and financial liabilities at amortized cost, except for investments, open hedge positions on current and future crop year and deferred hedge revenue, which are measured at fair value. Changes in fair value are recognized in net surplus. Impairment Financial assets measured at amortized cost are tested for impairment when there are indicators of impairment. If an impairment has occurred, the carrying amount of financial assets measured at amortized cost is reduced to the greater of the discounted future cash flows expected or the proceeds that could be realized from the sale of the financial asset. The amount of the write down is recognized in net surplus. The previously recognized impairment loss may be reversed to the extent of the improvement, directly or by adjusting the allowance account, provided it is no greater than the amount that would have been reported at the date of the reversal had the impairment not been recognized previously. The amount of the reversal is recognized in net surplus. Transaction costs The association recognizes its transaction costs in net income in the period incurred. However, financial instruments that will not be subsequently measured at fair value are adjusted by the transaction costs that are directly attributable to their origination, issuance or assumption. CASH FORWARD CONTRACTS Grain Farmers of Ontario enters into cash forward contracts with producers to purchase wheat at a contracted price on a defined delivery date. The position taken by Grain Farmers of Ontario as a result of the cash forward contracts is hedged through the sale of futures contracts that approximate the price, quantity and delivery term. Any gains or losses relating to the cash forward contracts or the designated futures are recognized upon the sale of the wheat. FUTURES AND OPTIONS In order to manage its exposure to currency and price risks, the association uses futures and options. Premiums paid and received on the settlement of futures and options, relating to the current crop year, are included in the revenue of each pool or forward contract account. The premiums paid or received on settlement of futures and options, relating to future crop years, are deferred and recognized on the statement of financial position in the appropriate crop year. The association formally documents all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedge transactions. This process includes linking all derivatives to specific assets and liabilities on the statement of financial position or to specific firm commitments or forwarded transactions. The association also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are effective. Realized and unrealised gains or losses associated with derivative instruments, which have been terminated or cease to be effective prior to maturity, are deferred under current assets or liabilities on the statement of financial position and recognized in income in the year in which the underlying hedged transaction is recognized. In the event a designated hedged item is sold, extinguished or matures prior to the termination of the related derivative instrument, any realized or unrealised gain or loss on such derivative instrument is recognized in income.

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