ARCHIVED -  Public Notice CRTC 1993-174

Public Notice

Ottawa, 10 December 1993

Public Notice CRTC 1993-174

ADDITIONAL CLARIFICATION REGARDING THE REPORTING OF CANADIAN PROGRAMMING EXPENDITURES

On 22 June 1993 the Commission issued Public Notice CRTC 1993-93 clarifying the Commission's position with respect to a number of issues relating to the reporting of Canadian programming expenditures by English-language conventional television licensees who are subject to Canadian expenditure requirements, whether by condition of licence or by expectation. The public notice was issued to ensure that all licensees have a clear understanding of the Commission's definition of eligible Canadian programming expenditures and its determination as to the appropriateness of certain accounting practices.

Further to queries raised with Commission staff by the Chief Financial Officers' Committee of the Canadian Association of Broadcasters (CAB), the Commission hereby provides further clarification with respect to the type of losses that will be accepted as eligible expenditures on Canadian programming. This notice also sets out how the Commission intends to assess compliance with expenditure requirements for Canadian programming.

In Public Notice CRTC 1993-93, the Commission stated that, while loans provided by licensees to assist in the financing of a Canadian production do not qualify as acceptable expenditures, losses on equity investments in productions of Canadian programs with arm's-length companies would so qualify.

The CAB representatives pointed out that, in addition to equity investments, licensees may also provide financing for productions set up in the form of debt instruments such as loans or advances. Such arrangements are very similar to equity investments and may result in capital losses.

The Commission has determined that, while loans will continue to be ineligible, it will accept as a qualifying Canadian programming expenditure losses of principal on loans made to arm's-length companies relating to the production of Canadian programs. Foregone interest or losses of interest revenue on loans, however, will continue to be ineligible as Canadian programming expenditures.

The Commission is satisfied that this approach is consistent with its position set out in Public Notice CRTC 1993-93, in that the amount of any capital loss by a licensee on an investment in a Canadian production will be considered an eligible Canadian programming expenditure, regardless of the vehicle used by the licensee to make the investment.

The CAB representatives also addressed how they believed the Commission should assess television licensees' compliance with their Canadian programming expenditure requirements over the current licence term in light of the clarifications regarding the eligibility of program expenditures and the Commission's determination as to the acceptability of certain accounting practices, as described in the June 1993 public notice.

In the CAB's view, Public Notice CRTC 1993-93 constituted a "new policy" and it argued that the clarifications should not be applied retroactively. The CAB stated that it expects some licensees may have included, in the financial projections filed at the time of their last licence renewal, certain Canadian programming expenditures that the Commission, in its June 1993 public notice, stated it considers ineligible.

In its June 1993 notice, the Commission noted that it had discovered "a number of inconsistencies and interpretation difficulties" in reporting actual Canadian programming expenditures and stated that it wished to be satisfied that the Canadian programming expenditures formula was being applied in a consistent and equitable manner. In publishing its clarifications regarding the policy, the Commission recognized:

 ...that the directives outlined in this public notice will have a significant impact on some licensees, particularly on the larger corporate groups. It considers, however, that these findings will result in the consistent application of reporting and accounting procedures among all licensees subject to the Canadian programming expenditures formula, whether by condition of licence or as an expectation.

The Canadian programming expenditure requirements imposed on the licensees of most private, conventional, English-language television undertakings are based upon a formula tied to the figure that each licensee, in its most recent application for licence renewal, projected it would spend on such programming in the first year of its new licence term.

The Commission hereby advises such licensees that they will be provided an opportunity to demonstrate that an adjustment is warranted in their first year projections for Canadian programming expenditures, specifically that provision for expenditures on equity investments had been included in their projections for year one of the current licence term, and that such expenditures were in fact made in that year. Any licensee wishing the Commission to consider an application to amend the terms of its licence to allow for such an adjustment must provide supporting documentation as to the actual amount of the equity investments that were made in the first year.

Allan J. Darling
Secretary General