AR 2001 Layout_Final - Royal Ontario Museum

Royal Ontario Museum
Notes to Financial Statements June 30, 2002
1. General
The Royal Ontario Museum (the “Museum”) is an operating enterprise agency of the Province of Ontario incorporated without
share capital by Special Act of the Ontario Legislature. The Museum is Canada’s largest museum and one of the few of its kind to
explore and exhibit both the art and archaeology of human cultures and the history of the natural world. The Museum’s mission is
to inspire wonder and build understanding of human cultures and the natural world.
The Museum is registered as a charitable organization under the Income Tax Act (Canada) (the “Act”) and, as such, is
exempt from income taxes and is able to issue donation receipts for income tax purposes. In order to maintain its status as a registered
charity under the Act, the Museum must meet certain requirements within the Act. In the opinion of management, these
requirements have been met.
2. Renaissance ROM Project
The Board of Trustees has approved in principle, and for planning purposes a major re-development project for the
Museum. The project will be completed in two phases with a total estimated cost of $200 million. The first phase, with a total cost
of $150 million is planned for completion in December 2005. Phase II will cost an additional $50 million and is scheduled to be
completed one year later. The total project will involve construction and restoration of the original buildings as well as 40,000
square feet of new gallery spaces. Renaissance ROM will permanently alter the Museum’s economic base, providing additional annual
market income to sustain excellence across the board.
Funding for this project will come from the public and private sectors. To date the Museum has received commitments from
the Federal and Provincial governments of $60 million. As at June 30, 2002, the Museum has spent $1.6 million on the project which
is recorded on the balance sheet as capital assets.
In anticipation of the project, the remaining life of certain capital assets has been reduced and, as a result, the amortization
period of these assets revised accordingly. In addition, amortization of the related deferred capital contribution has been revised.
3. Summary of significant accounting policies
The financial statements have been prepared in accordance with Canadian generally accepted accounting principles applied within
the framework of the significant accounting policies summarized below:
Revenue recognition
The Museum follows the deferral method of accounting for contributions, which include donations and government grants.
Contributions are recognized as revenue when received or receivable if the amount to be received can be reasonably estimated and
collection reasonably assured. Donations are recorded on a cash basis since pledges are not legally enforceable claims.
Contributions externally restricted for purposes other than endowment are deferred and recognized as revenue in the year
in which the related expenses are recognized. Externally restricted contributions for the purchase of land are credited directly to
Invested in Capital Assets. Externally restricted contributions for the purchase of other capital assets are deferred and amortized
over the life of the related capital asset. Endowment contributions are recognized as direct increases in net assets in the year in which
they are received.
Investments
Investments are recorded at market value. Investment income consists of interest, dividends, realized gains (losses) and the net change
in unrealized gains and losses.
Inventories
Inventories, which consist primarily of gift shop items held for sale, publications and supplies, are stated at the lower of average cost
and net realizable value.
Deferred exhibitions and other costs
Costs of exhibitions are deferred until the exhibitions are opened to the public and then are expensed over the period of the exhibitions
to which they relate.
Employee benefit plans
The Museum accrues its obligations under employee benefit plans and related costs, net of plan assets. The cost of pensions and
other retirement benefits earned by employees is actuarially determined using the projected benefit method prorated on service and
management’s best estimate of expected plan investment performance, salary escalation, retirement ages of employees and expected
health care costs. For the purpose of calculating the expected return on plan assets, those assets are valued at a market-related
value whereby investment gains and losses are recognized over a three year period.
47