Financial Statements: Local Programming Improvement Fund – August 31, 2014

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Independent Auditors' Report

To the Board of Directors of
Canadian Local Programming Improvement Fund

We have audited the accompanying financial statements of Local Programming Improvement Fund, which comprise the statement of financial position as at August 31, 2014 and the statement of operations and fund balance for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Except as explained below, we conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.

Basis for qualified opinion

The Fund contributions are based on reports of prior-year gross revenues derived from broadcasting activities provided to the Canadian Radio-television and Telecommunications Commission ["CRTC"] by the licensed terrestrial Broadcasting Distribution Unit's and Direct–to–Home undertakings. A summary of this information was supplied to us by the CRTC. We did not audit the reports submitted to the CRTC. Therefore, we are unable to determine whether any adjustments to the Fund contributions and Fund distributions might be necessary.

Qualified opinion

In our opinion, except for the possible effects of the matter described in the Basis for qualified opinion paragraph, the financial statements present fairly, in all material respects, the financial position of Local Programming Improvement Fund as at August 31, 2014 and the results of its operations and cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations.

Emphasis of Matter

As described in Note 2(a) to the financial statements, on September 1, 2014, the Local Programming Improvement Fund was discontinued. As a result, the Local Programming Improvement Fund has changed its basis of accounting as of August 31, 2014, the date upon which liquidation became imminent, from the going concern basis to the liquidation basis. The figures presented for the fiscal year ended August 31, 2013 and for the period up to August 31, 2014 continue to be accounted for on the going concern basis. Our opinion is not modified in respect of this matter.

Statement of Financial Position

Statement of Operations and Changes in Fund Balance
Year ended August 31

Statement of Cash Flows

Notes to Financial Statements
August 31, 2014

1. Purpose of the Fund and Accounting Framework

The Local Programming Improvement Fund [the "Fund" or "LPIF"] is a fund created by the Canadian Radio-television and Telecommunications Commission ["CRTC"] in October 2008 pursuant to Broadcasting Public Notice CRTC 2008-100 and is not subject to income taxes. The purpose of the Fund is to support local programming produced by conventional television stations operating in non-metropolitan markets. The objectives of the Fund are to ensure that viewers in smaller Canadian markets continue to receive a diversity of local programming, to improve the quality and diversity of local programming in these markets and to ensure that viewers in French-language markets are not disadvantaged by the smaller size of those markets.

2. Summary of Significant Accounting Policies

These financial statements have been prepared in accordance with Canadian accounting standards for not-for-profit organizations. The following significant accounting policies have been used in the preparation of these financial statements.

[a] Basis of Accounting

Pursuant to Broadcasting Regulatory Policy CRTC 2012-385, the CRTC discontinued the Fund effective September 1, 2014. As a result, the LPIF has changed its basis of accounting as of August 31, 2014, the date upon which liquidation became imminent, from the going concern basis to the liquidation basis in accordance with CPA Handbook Section 1401, "General Standards of Financial Statement Presentation". The liquidation basis of accounting has been applied prospectively as of August 31, 2014.

Under the liquidation basis of accounting, financial assets and liabilities are measured at the amounts expected to be received and paid, respectively. Assets earned and liabilities incurred as a result of the dissolution are accrued when the amount can be reasonably estimated.

These financial statements include accrued interest revenue of $20,757 as a result of the dissolution. Liquidation costs accrued in these financial statements include fund administration of $113,000, insurance of $32,850, legal of $30,474, audit of $7,560 and bank charges of $464. Amounts are expected to be received and paid in cash over the period of liquidation.

The figures presented for the fiscal year ended August 31, 2013 and for the period up to August 31, 2014 continue to be accounted for on the going concern basis. The impact of the change to the liquidation basis of accounting is included in the period ended August 31, 2014.

[b] Revenue recognition

The LPIF follows the deferral method of accounting for contributions. Restricted contributions are recognized as revenue in the year in which related restrictions are met. Unrestricted contributions are recognized as revenue when received or receivable, if the amount can be reasonably estimated, and collection is reasonably assured.

The LPIF is funded through contributions by licensed terrestrial Broadcasting Distribution Unit's and Direct–to–Home undertakings. The contribution for the 2014 broadcast year is 0.5% of the prior broadcast year's gross revenue derived from the broadcasting activities of licensees. Any adjustments are accounted for in the year during which the change is communicated to the Fund Administrator by the CRTC.

Interest revenue is recognized when earned.

[c] Fund distributions

LPIF funding is distributed to eligible stations as follows: one third of total funds are divided evenly among all eligible stations in Anglophone and francophone markets and the remaining two thirds are divided so that 70% goes to Anglophone markets, and 30% to francophone markets. These remaining two thirds are then allocated on the basis of average net spending on local programming over three years and are proportional to the percentage of LPIF funding available to eligible stations within a linguistic market. Eligibility for participation in LPIF funding is determined by the CRTC. Any adjustments are accounted for in the year during which the change is communicated to the Fund Administrator by the CRTC.

[d] Financial instruments

The Fund's financial instruments consist of cash, contributions receivable, accounts payable and accrued liabilities, distributions payable and other payables.

Measurement

Financial instruments are recorded at fair value on initial recognition.

The Fund subsequently measures all of its financial assets and financial liabilities at amortized cost.

Impairment

Financial assets measured at amortized cost are tested for impairment when there are indicators of impairment. The amount of any write-down or subsequent recovery is recognized in net income. A previously recognized write-down can be reversed to the extent of the improvement.

[e] 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, liabilities, revenue and expenses and disclosure of contingent assets and liabilities. These estimates are reviewed periodically and adjustments are made to net revenue as appropriate in the year they become known.

3. Financial Risks and Concentration of Risk

It is management's opinion that the Fund is not exposed to significant interest rate, liquidity, market, currency or credit risks arising from its financial instruments. There has been no change to the risk exposure from 2013.

4. Canadian Local Programming Improvement Fund

The Canadian Local Programming Improvement Fund ["CLPIF"] oversees the administration of the Fund and the Fund Administrator's performance of its duties.  Any expenses of the CLPIF are paid for and considered an expense of the Fund.

Schedule 1

Schedule of Fund Distributions
As at August 31

Date modified:

2015-10-27