Tangible Capital Asset Review Completed

A two-year review of how the provincial government values its capital assets is resulting in amendments to the tangible capital asset policy. In 2002, a tangible capital assets policy review committee began an in-depth review on the policy's operational effectiveness and appropriateness.

The report supports the existing policy, but recommends some revisions to thresholds, classes and amortization rates. The report was reviewed by the auditor general's office with further recommendations, which the Department of Finance has accepted. The policy review was conducted by senior civil servants.

"Our accounting policies are periodically reviewed to ensure they reflect the current environment and best practice," said Finance Minister Peter Christie.

In his management letter of Feb. 13, 2004, the auditor general recommended that the province review its threshold levels and encouraged the province to finalize its review.

Amortization rates have been adjusted to be more in line with the useful life of each asset, which will result in improved program costing. Previously, assets were amortized over shorter time frames, which proved more costly than necessary.

There are three significant revisions to the policy: revised thresholds for two asset classes; revised amortization rates for several asset classes; and two new classes added to tangible capital assets (buses and land improvements). The revisions do not constitute a change in accounting policy. The recommendations represent a change in accounting estimates and are effective as of April 1, 2003.

The revisions to the accounting thresholds and rates have resulted in a $25 million reduction in operating expenses in 2003-04. This is a combination of a $2-million reduction in operational expenses that will now be reclassified as a result of a reduction in the thresholds and $23 million resulting from changes to the amortization rates.

There is no impact to the province's debt reduction plan, or to the debt.

"Nova Scotia was one of the first provinces to adopt a tangible capital asset policy, in accordance with generally accepted accounting principles," said Kevin Malloy, the province's controller. "We're learning from experience and the review has helped us bring our rates more in line with where they should be."

"Nova Scotia is a leader in government financial accountability, so we are announcing these revisions in the interest of full and open disclosure of the province's policies," said Mr. Christie.