annual report 2011/12 - Manitoba Agricultural Services Corporation

Notes to Financial Statementsas at March 31, 2012 (tabular amounts in thousands of dollars)1. NATURE OF ORGANIZATIONThe Manitoba Agricultural Credit Corporation (MACC) was established under The Agricultural Credit CorporationAct. The Manitoba Crop Insurance Corporation (MCIC) was established under The Crop Insurance Act. As a result ofthe proclamation of The Manitoba Agricultural Services Corporation Act, C.C.S.M. c.A25 on September 1, 2005, MACCand MCIC were amalgamated to form a provincial Crown corporation called the Manitoba Agricultural ServicesCorporation (MASC) and the legislation establishing the former corporations was repealed.MASC provides lending, insurance and other programs and services. Its core programs include direct loans toagriculture producers, loan guarantees, AgriInsurance and Hail Insurance. MASC also delivers the Wildlife DamageCompensation Program, Farmland School Tax Rebate Program and other programs and services.2. SIGNIFICANT ACCOUNTING POLICIES AND REPORTING PRACTICESMASC’s financial statements are presented in accordance with Canadian Public Sector Accounting (PSA) standards.MASC adopted PSA standards with a transition date of April 1, 2010. More details on this transition are provided in Note 4.MASC elected the early adoption of PS3450 Financial Instruments and PS3041 Portfolio Investments. No adjustmentto financial assets and liabilities was required.(A)(B)InvestmentsFunds in excess of operational needs are invested with the Province of Manitoba, in accordance with Section 52(1)of The Manitoba Agricultural Services Corporation Act. Investments are carried at cost or amortized cost.Investments are normally held to maturity, but if early redemption is required and results in a gain or loss, thegain or loss is realized on disposal.Loans ReceivableLoans receivable are recorded at cost or amortized cost less any amount for provisions for credit losses.Provisions for impaired loans are made when collection is in doubt. Interest is accrued on loans receivableuntil the date of write-off. The provision represents management’s best estimate of probable losses. Wherecircumstances indicated doubt as to the ultimate collectability of principal or interest, specific provisionsare established for individual accounts. These accounts are valued at the lower of their recorded value or theestimated net realizable value of the security held for the accounts. In addition to the provision for loss on loansidentified on an individual loan basis, MASC establishes a general provision representing management’s bestestimate of additional probable losses based on other factors including the composition and credit quality of theportfolio and changes in economic and business conditions. Actual loan accounts that have been written off arecharged to the appropriate provision once the available security has been realized and all other collection effortshave been exhausted.Periodically the Province of Manitoba will approve special assistance loans with concessionary interest rates.These loans are discounted using the present value method when they involve significant concessionary elements.The discounted amount is expensed at the time the loans are disbursed and is amortized to revenue over the lifeof the concessionary terms.Manitoba Agricultural SeRVICes Corporation – 2011/12 Annual Report 35