Date sent:  May 18, 2012

To:  Deputy Chief Financial Officers

Message on behalf of Sylvain Michaud, Executive Director, Government Accounting Policy and Reporting, Office of the Comptroller General

The purpose of this communication is to notify departments of a revision to the ratio previously provided on April 12, 2012, for the calculation of departmental severance pay liability as at March 31, 2012.

The government‑wide liability for severance pay is determined on an actuarial basis each year for presentation in the Public Accounts of Canada.  One of the key factors required for the calculation of this liability is the long-term discount rate.  In order to provide departments with sufficient time to record a departmental liability for severance pay in extended period 12-1, the ratio for the liability is initially determined using a preliminary estimate of the long-term discount rate.  Subsequently, the actual liability for severance pay that is presented in the Public Accounts of Canada is determined on a government‑wide basis using the final approved long-term discount rate as at March 31 of the current year.

For fiscal year 2011-12, the final government-wide liability for severance pay calculated on an actuarial basis using the final approved long-term discount rate is higher than the estimated liability used to determine the ratio originally communicated on April 12, 2012.  Consequently, the actual departmental liability for severance pay as at March 31, 2012 for the employee groups for which the severance has not been eliminated should have been calculated using the rate of 26.4%.

Departments and agencies are encouraged to evaluate the materiality of the increase in the ratio when preparing their departmental financial statements in order to determine if the severance pay liability and the related expense should be adjusted accordingly.

Since the Central Financial Management Reporting System trial balance for the extended period 12-2 has already been submitted, adjustments to the liability for severance pay need to be done only for presentation purposes in your departmental financial statements.

Should you have any questions regarding the revised ratio for severance pay liability, please contact Leona Melamed at 613‑946‑7538.  Questions related to the departmental financial statements can be addressed to Anne‑Marie Dionne at 613‑952‑1004.

Date modified: