Ontario Grain Farmer October 2021

An update on Grain Farmers of Ontario news and events Notes to the Financial Statements For the year ended May 31, 2021 2. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INVESTMENTS In accordance with the Farm Products Marketing Act, the organization has deposited funds in low risk investments. The organization accounts for its investments at fair value without any adjustment for transaction costs it may incur on the sale or other disposal. INTEREST AND BANK CHARGES Interest expense and charges incurred by the association and the interest revenue earned are calculated on an accrual basis. Interest expenses and revenues related to the operation of the pools and forward contract programs are allocated to the separate pools and forward contract account on the basis of relative tonnage. GENERAL AND ADMINISTRATIVE EXPENSES License fees were set to cover administration, research and market development activities, and other producer programs to the benefit of all producers. WHEAT MARKETING GENERAL AND ADMINISTRATIVE EXPENSES A proportionate amount of general and administrative expenses are allocated to wheat marketing in the pool and contract accounts. These allocations include salaries, benefits, employee expenses, and a proportion of the general office expenses, professional and consulting services, rent and maintenance. Allocations to the pool and contract accounts are based on delivered and contracted tonnage during the year. FUND ACCOUNTING Grain Farmers of Ontario follows the restricted fund method of accounting for contributions. Unrestricted net assets The unrestricted fund reports resources available for the association's general operating activities. The purpose of the unrestricted net assets is to fund future general operations. Wheat marketing fund This externally restricted fund reports resources that have been accumulated through the purchase and sale of wheat through the forward contracting program as well as resources transferred from the predecessor organizations. This fund was established for the purpose of mitigating risk in the fluctuation in the price of wheat purchased or sold, as permitted through Regulation 485-09 of the Ontario Farm Products Marketing Act. Research fund This internally restricted fund reports resources set aside for future expenditures for ongoing research projects. The purpose of the internally restricted research fund is to segregate research activity to more accurately reflect the funds raised externally, the costs incurred, and the use of unrestricted revenue in research. Market development fund This internally restricted fund reports resources set aside for future expenditures for ongoing market development activities. The purpose of the internally restricted market development fund is to segregate market development activity to more accurately reflect the projects and partnerships that Grain Farmers of Ontario is developing. USE OF ESTIMATES The preparation of financial statements in conformity with Canadian accounting standards for not for profit organizations requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses for the reporting year. Significant estimates include the valuation of wheat inventory and the useful lives of capital assets. Actual results could differ from those estimates. 3. FINANCIAL INSTRUMENTS Unless otherwise noted, it is management's opinion that the association is not exposed to significant interest, credit, currency, liquidity, or other price risks arising from its financial instruments. The extent of the association's exposure to these risks did not change in 2021 compared to the previous period. The association does not have a significant exposure to any individual customer or counterpart. Credit risk The major concentration of credit risk arises from the association's accounts receivable. The majority of the accounts receivable are from organizations in the agricultural and food processing industry. The association manages the risk through evaluation and monitoring processes. Market risk Market risk is the risk that the fair value or future cash flows of the company’s financial instruments will fluctuate because of changes in market prices. Some of the company’s financial instruments expose it to this risk, which comprises currency risk, interest rate risk and other price risk. Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The association is exposed to interest rate risk as a result of the fixed coupon rates on its bonds. Should market interest rates fluctuate significantly from these fixed coupon rates, the fair value of the bonds will be correspondingly affected. Currency risk The currency risk refers to the risk that lies in its cash forward contracts with producers. Cash forward contracts are denominated in United States dollars (USD). To manage currency risk, the association purchases Canadian dollar futures to protect itself from potential exchange losses. The open positions at May 31, 2021 have a hedge value of $0 (2020 - $(32,579)). Foreign exchange (losses) gains in the year were $(65,381) (2020 - $4,502). Other price risk The association entered into cash forward contracts with producers for future delivery. The association has hedged its exposure through the sale of wheat futures or cash forward sales. The open positions at May 31, 2021 have a hedge value of $0 (2020 - $33,847). 4. CAPITAL ASSETS Accumulated Net Net Cost Amortization 2021 2020 Land $ 208,000 $ 0 $ 208,000 $ 208,000 Building 5,075,241 968,760 4,106,481 4,295,468 Office furniture and fixtures 287,713 267,148 20,565 25,589 Computer equipment 582,785 512,828 69,957 87,800 Equipment 138,200 119,006 19,194 65,261 Lab equipment 599,999 374,999 225,000 299,999 Passenger vehicle and trailers 513,370 409,290 104,080 57,660 $7,405,308 $ 2,652,031 $4,753,277 $5,039,777 5. DEFERRED REVENUE Deferred revenue consists of: 2021 2020 Deferred research revenue $ 107,821 $ 102,181 26