25 ONTARIO GRAIN FARMER OCTOBER 2022 Notes to the Financial Statements For the year ended May 31, 2022 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 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. Investment income is recognized as revenue when earned. Revenue from wheat sales was recognized in the accounts under the terms and value defined in the sales contract. Sales were recognized when the contract was signed and the inventory was committed. All remaining revenue is recognized as earned and collection is reasonably assured. 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. 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, 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. 2. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. 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. 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. 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 useful lives of capital assets. Actual results could differ from those estimates. 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 reported resources that had 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. Legacy fund This internally restricted fund reports resources set aside for future expenditures for strategic initiatives that will add value to the Ontario grain industry. The purpose of the internally restricted legacy fund is to provide financial resources to support initiatives above and beyond current Grain Farmers of Ontario programs.
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