Notes to Financial Statements

2020

1. Description of business

The Canadian Cattlemen’s Association (the “Association” or “CCA”) was incorporated in March 1932. Under the Income Tax Act (Canada), the Association is classified as a not-for-profit organization and, accordingly, is not subject to income taxes. The Association’s mandate is to represent the interests of Canadian beef producers for the enhancement of the beef industry. The Association undertakes its activities through a number of divisions.

The Canadian Cattlemen’s Association Segment (“CCA Segment”) funds specific projects and organizational operations through provincial assessments.

The Canfax Market Analysis provides market intelligence services and up to the minute information to its members, who are primarily feedlot, cow-calf and backgrounding operators.

The Canfax Research Services provides a market research service that is used by provincial cattlemen’s association and government.

The Beef Cattle Research Council (“BCRC”) sets priorities and contributes funding to national beef research and development projects in specific research areas.

The Beef Science Cluster is a contribution agreement between the Canadian Cattlemen’s Association and Agriculture and Agri-Food Canada. This initiative is administered by the Beef Cattle Research Council. It is intended to fund practical, applied research to improve the competitiveness of Canada’s beef value chain, and to encourage continued investment in infrastructure and human capital in strategically important areas of beef and cattle research.

The Canadian Roundtable for Sustainable Beef (“CRSB”) was set up as a division of CCA to engage a broad range of stakeholders to promote sustainability throughout the Canadian beef industry through three pillars of focus – Certified Sustainable Beef Framework, Sustainability Benchmarking, and Sustainability Projects.

The Public and Stakeholder Division (“PSE”) was set up as a division of CCA with the goal of increasing consumer confidence, trust, and support of Canadian beef production practices, which will result in increased beef demand over competing proteins.

2. Significant accounting policies

The financial statements have been prepared in accordance with Canadian accounting standards for not-for-profit organizations and include the following significant accounting policies:

Divisional reporting

These financial statements have been prepared to include the results of the following Association divisions: the Canadian Cattlemen’s Association Segment, the Canfax Market Analysis Division, the Canfax Research Services Division, the Beef Cattle Research Council, the Beef Science Cluster, the Canadian Roundtable for Sustainable Beef, and Public and Stakeholder Engagement.

For presentation purposes, amortization expense has not been segregated on the Schedule of Operations and changes in Net Assets for the Canadian Cattlemen’s Association Segment, the Canfax Market Analysis Division, the Canfax Research Services Division, the Beef Cattle Research Council, the Beef Science Cluster, the Canadian Roundtable for Sustainable Beef, and Public and Stakeholder Engagement.

Expenditures

The expense categories on the Schedule of Operations for the Canadian Cattlemen’s Association Segment have been grouped by department.

The expense categories on the Schedules of Operations and Net Assets for the CCA Segment, the Canfax Market Analysis Division, the Canfax Research Services Division, the BCRC Division, the Beef Science Cluster, the Canadian Roundtable for Sustainable Beef, and Public and Stakeholder Engagement have been grouped by type of expense.

Cash

Cash includes bank balances and deposits with maturities of three months or less. Cash subject to restrictions that prevent its use for current purposes is included in restricted cash.

Property and equipment

Purchased property and equipment are recorded at cost.

Amortization is provided using the straight-line method at rates intended to amortize the cost of assets over their estimated useful lives.

Revenue recognition

The Association follows the deferral method of accounting for contributions. Restricted contributions are recognized as revenue in the year in which the related expenses are incurred. Unrestricted contributions are recognized as revenue when received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured. Subscription and assessment revenues that meet the definition of a liability are deferred and recognized on a pro-rata basis over the subscription and assessment period. Interest income is recognized as revenue in the year in which it is earned.

Contributed service and materials

Contributions of services and materials are recognized both as contributions and expenses in the Statement of Operations when a fair value can be reasonably estimated and when the materials and services are used in the normal course of the Association’s operations and would otherwise have been purchased.

Investments

Investments are recorded at fair value for those with prices quoted in an active market, and cost less impairment for those that are not quoted in an active market.

Measurement uncertainty (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 and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting year.

Accounts receivable are stated after evaluation as to their collectability and an appropriate allowance for doubtful accounts is provided where considered necessary. Amortization is based on the estimated useful lives of property and equipment.

These estimates and assumptions are reviewed periodically and, as adjustments become necessary, are reported in excess of revenues over expenses in the years in which they become known.

Allocation of expenses

The Association follows CPA Handbook Section 4470 Disclosure of Allocated Expenses, which establishes disclosure standards for not-for-profit organizations that classify their expenses by function and allocate their expenses to a number of functions to which the expenses relate. The Association has allocated administrative expenses, primarily salaries and office expense, to the Canadian Cattlemen’s Association Segment, Canfax Market Analysis Division and Beef Cattle Research Council Division. The expenses are allocated based on budgeted figures and are disclosed in the accompanying schedules. The Association does not engage in any fundraising activities.

Restricted net assets

Restricted net assets represent amounts set aside to finance future operating and capital expenditures. Restrictions are established at the discretion of the Association. Increases to and/or from the restricted net assets are reflected as an adjustment to the respective division.

Financial instruments

The Association recognizes its financial instruments when the Association becomes party to the contractual provisions of the financial instrument. All financial instruments are initially recorded at their fair value, including financial assets and liabilities originated and issued in a related party transaction with management. Financial assets and liabilities originated and issued in all other related party transactions are initially measured at their carrying or exchange amount in accordance with CPA Handbook Section 3840 Related Party Transactions.

At initial recognition, the Association may irrevocably elect to subsequently measure any financial instrument at fair value. The Association has not made such an election during the year.

The Association’s financial assets and liabilities are subsequently measured at amortized cost.

Financial asset impairment

The Association assesses impairment of all of its financial assets measured at cost or amortized cost. The Association groups assets for impairment testing when there are numerous assets affected by the same factors. When there is an indication of impairment, the Association determines whether it has resulted in a significant adverse change in the expected timing or amount of future cash flows during the year. If so, the Association reduces the carrying amount of any impaired financial assets to the highest of: the present value of cash flows expected to be generated by holding the assets; the amount that could be realized by selling the assets; and the amount expected to be realized by exercising any rights to collateral held against those assets. Any impairment which is not considered temporary is included in current year excess of revenue over expenses.

The Association reverses impairment losses on financial assets when there is a decrease in impairment and the decrease can be objectively related to an event occurring after the impairment loss was recognized. The amount of the reversal is recognized in the excess of revenue over expenses in the year the reversal occurs.

3. Accounts receivable

4. Related party transactions

During the year, the Association provided a loan to VBP+ Delivery Services Inc., a party related through significant influence due to a common director. The loan is non-interest bearing and there are no principal repayments due within the first five years. Repayments of $100,000 per year will commence in 2023.

These transactions were in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

5. Property and equipment

6. Investments

7. Accounts payable and accrued liabilities

8. Deferred contributions

Deferred contributions consist of the following:

a) During the year, interest of $16,779 (2019 – $21,147) was earned on the grant, and grant income allocations for the year totalled $3,810,507 (2019 – $3,651,135). Expenditures totalled $1,933,501 (2019 – $1,910,958) resulting in a deferred balance for the Beef Science Cluster of $1,877,006 (2019 – $1,748,419).

b) During 2020, the Beef Cattle Research Council received $500,343 (2019 – $348,258) including interest earned of $92,892 (2019 – $89,052) as funding for Canadian Integrated Program for Antimicrobial Resistance Surveillance (CIPARS), Surveillance of antimicrobial use and resistance in Canadian feedlot cattle, Developing a Canadian Tool Quality Management System for Beef Processing, and VBP+ Industrial and Market Alignment. As at June 30, 2020 the Beef Cattle Research Council has spent $421,654 (2019 – $297,284) on qualifying activities and the balance of unexpended funds is $237,053 (2019 – $146,234) which has been deferred.

c) These balances represent the unearned portion of yearly subscriptions billed for Canfax Marketing.

d) The balance represents the unearned portion of funds received from the provincial members to help support legal costs. A standing policy is on record that the Canadian Cattlemen’s Association retain a cap of $500,000 in the legal reserve with a special assessment triggered quarterly for all legal costs incurred.

e) During the 2020 fiscal year, the Association received industry sponsorship of $149,000 (2019 – $168,500). In the 2020 fiscal year, the Association spent $127,989 (2019 – $131,847) in qualifying expenses. The balance of unexpended funds is $248,374 (2019 – $227,363) and this amount has been deferred.

f) During the 2020 fiscal year, the Association received $1,452,472 (2019 – $1,144,133) in industry sponsorship and government funding for the Sustainable Beef Program. As of June 30, 2020, the Association has spent $1,083,740 (2019 – $1,303,614), resulting in deferred contributions of $325,689 (2019 – $87,935).

g) During the 2020 fiscal year, the Association received $293,393 (2019 – $248,546) in contracts for the Canfax Research Services Division. As of June 30, 2020, the Association has spent $252,342 (2019 – $242,023), resulting in deferred contributions of $63,760 (2019 – $16,523).

h) During the 2020 fiscal year, the Association received $nil (2019 – $nil) in sponsorships for the Town Halls Division. As of June 30, 2020, the Association has spent $16,458 (2019 – $nil), resulting in deferred contributions of $nil (2019 – $16,458).

i) During the 2020 fiscal year, the Association received $22,400 (2019 – $23,485) in contributions for the National Beef Advisors. As of June 30, 2020, the Association has spent $20,345 (2019 – $27,332), resulting in deferred contributions of $4,193 (2019 – $2,138).

j) During the 2020 fiscal year, the Association received $nil (2019 – $590,400) in sponsorships for the development and advertising of public engagement programs. As of June 30, 2020, the PSE Division has spent $235,225 (2019 – $355,175), resulting in deferred contributions of $nil (2019 – $235,225). During the year, the Association transferred the public engagement program from a project into a division of the Association.

9. Commitments

The Association has annual lease commitments for office space in Calgary and Ottawa. The Calgary lease expires May 31, 2024 and the Ottawa lease expires August 31, 2027. The Association has entered into various lease agreements with estimated minimum annual payments as follows:

In addition, the Association is obligated to pay common area costs under certain leases.

10. Net assets

During 2020, the CCA Segment increased its restricted assets from $335,856 to $647,055, the CRSB increased its restricted assets from $nil to $125,000, the Special Projects Fund increased its restricted net assets from $nil to $202,645, and the Public and Stakeholder Engagement fund increased its restricted assets from $nil to $40,000.

11. Budget information

Budget figures shown on the divisional supplementary schedules have not been audited. They were approved by the Board of Directors.

12. Economic dependence

The Canadian Cattlemen’s Association Segment receives a significant amount of its revenue from assessments received from various provincial associations. Each member province is assessed by the Association according to its relative marketing. The Association received $3,530,214 (2019 – $3,353,978) in assessments and $nil (2019 – $387,245) in legal assessments; during the year, $nil (2019 – $214,773) of legal assessments previously received and deferred were recognized as revenue. The Canfax Market Analysis Division received $469,803 (2019 – $431,525) in subscriptions. The Beef Cattle Research Council received $5,756,444 (2019 – $5,851,923) of funds from the Canadian Beef Cattle Check-Off Agency.

13. Financial instruments

All significant financial assets, financial liabilities and equity instruments of the Association are either recognized or disclosed in the financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk, credit risk, currency risk, liquidity risk and other price risk.

14. Indemnifications

In the ordinary course of operations, the Association enters into grant and contribution agreements which contain indemnification provisions. In such contracts, the Association may indemnify counter parties to the contracts if certain events occur. These indemnification provisions vary on an agreement by agreement basis. In some cases, there are no pre-determined amounts or limits included in the indemnification provisions and the occurrence of contingent events that will trigger payment under them is difficult to predict. Therefore, the maximum potential future amount that the Association could be required to pay cannot be reasonably estimated, and no amounts have been recorded in these financial statements.

15. Compensation

The remuneration and benefits paid to all members of the Board of Directors (on an individual basis by title) are as follows:

16. Investment in BIXSCO Inc.

On April 20, 2018, the Association entered into an agreement with ViewTrak Technologies Ltd. (“ViewTrak”) to convert the 25 common shares it owned of BIXSCO Inc. (“BIXSCO”) to 250,000 preferred shares with a redemption value of $1.00 per share. The preferred shares had voting rights. Property with an agreed upon value of $250,000 but with a value of $nil on these financial statements was transferred to BIXSCO. As the transaction was between related parties, it was measured at the carrying amount.

On May 1, 2019, the Association redeemed the 250,000 BIXSCO preferred shares in exchange for $250,000 cash. This resulted in a premium on redemption of shares of $249,975 which has been included in Canadian Cattlemen’s Association Segment income for the year.

17. Subsequent event

During the year, the Association voted to integrate the Canadian Beef Breeds Council as a division of the Association. This integration came into effect on July 1, 2020.

18. Significant event

During the year, there was a global outbreak of COVID-19 (coronavirus), which has had a significant impact on businesses through the restrictions put in place by the Canadian, provincial and municipal governments regarding travel, business operations and isolation/quarantine orders. At this time, it is unknown the extent of the impact the COVID-19 outbreak may have on the Association as this will depend on future developments that are highly uncertain and that cannot be predicted with confidence. These uncertainties arise from the inability to predict the ultimate geographic spread of the disease, and the duration of the outbreak, including the duration of travel restrictions, business closures or disruptions, and quarantine/isolation measures that are currently, or may be put, in place by Canada and other countries to fight the virus.