Canada Health Infoway

1. Operations and Objectives

Canada Health Infoway (Infoway), established in 2001, is an independent federally funded organization. Infoway's mission is to accelerate the development and adoption of electronic health information and communication systems in Canada. Infoway collaborates with all provinces and territories ensuring interoperability among each jurisdictions' electronic health record (EHR) systems. In 2006, Infoway launched the Standards Collaborative to provide services related to health informatics standards, such as governance, education, training, conformance, maintenance, and client support services. These services support the development of EHR system. The pan-Canadian EHR network will improve health care services for Canadians by enabling timely and accurate information being shared among health care professionals about patient diagnosis and treatment. The result of this project will dramatically enhance the quality and efficiency of Canada's health care system.

Infoway has ten investment programs with its own unique development strategy. These investment programs provide funding for EHR projects proposed by each province and territory. Once an EHR project is approved, it will be funded by one or more of the ten investment programs and managed by the individual jurisdiction. Ultimately, these programs are to promote a comprehensive network of interoperable EHR solutions across Canada.

1.1. Infoway's Investment Programs:

§ Diagnostic Imaging Systems

§ Drug Information Systems

§ Infostructure

§ Innovation & Adoption

§ Interoperable EHR

§ Laboratory Information Systems

§ Patient Access to Quality Care

§ Public Health Surveillance

§ Registries

§ Telehealth

Infoway's goal by the end of 2010 is to have 50 percent of Canadians with their own electronic health records available to their health care providers; and by 2016, for all Canadians to have their own electronic health record.

2. Presentation Model Chosen

Infoway uses the deferral method to account for its contributions received. When a company uses this method, there are several characteristics that it must follow. For instance, "restricted contributions related to expenses of future periods are deferred and recognized as revenue in the period in which the related expenses are incurred."[1] In its current 2008-2009 annual report, notes to financial statements - significant accounting policies, details on the revenue recognition policies are provided. "Externally restricted contributions from the Government of Canada are recognized as revenue in the year in which the related expenses are recognized."[2] Furthermore, if the corporation uses the deferral method to account for the contributions used in the acquisition of capital assets, "the related expenses are amortized yearly and the contribution is deferred and recognized as revenue on the same basis as the asset is being amortized."[3] For Infoway, the corporation has chosen to "defer the restricted contributions in purchasing net assets while amortizing the contributions using the straight-line method. The rate used for amortization corresponds with the amortization rate for the related assets."[4] Hence, by referring back to the income statement of Infoway, it is evident that the revenue section comprises of "Contribution from restricted sources" and "Amortization of deferred contributions related to capital assets", where both amounts combined are matched to the current period expenses relating to different programs and projects.

Investment income is not presented on the financial statements but details relating to the investments are disclosed. However, it is indicated in the notes that any "investment income is recognized as revenue on the same basis as the externally restricted contributions."[5] This corresponds with restricted investment income treated in the same manner as restricted contributions, "Restricted investment income is recognized as revenue of the appropriate fund in the year in which the related expenses are incurred."[6]

2.1. Model Adopted

2.2. Appropriateness of Model

Infoway uses the deferral method with no fund accounting for the reporting of their financial position. Most of the corporation's contributions received are supported by the Government of Canada, and is restricted towards the development of health information systems. The government provides contributions yearly upfront to the organization. Since the contributions are related to the expenses that the corporation will spend in the future towards the many different projects it is involved in, it would be appropriate to use a method where these expenses are recognized in the period they are incurred. This would provide a better representation of the allocation of contributions as program expenditures are spent over the many project milestones.

Furthermore, the organization would be responsible in preparing a statement of changes in net assets under the deferral method. This statement of change can help to illustrate the "cost of services provided by the equipments"[7] Due to the nature of the organization's commitments, the capital assets that are being invested accounts for a large part of its daily operations. Therefore, it would be of shareholder's interests to understand the details relating to the organization's capital asset purchases. Based on the information provided in the organization's annual report, it does not appear to receive any endowment contributions. From this, it can be seen that the organization does not apply its contributions to many different areas of use. It is mainly focused on using the funding to deliver the projects. Hence, it would be unnecessary to divide further into separate funds, as would be required under the restricted fund method. By following the deferral method, the organization can present the information in a more straightforward way, where the spending matched against contributions used towards carrying out projects is its emphasis.

Overall, based on the nature of the corporation's commitments, it selected the appropriate model in presenting the financial performance of the organization.

3. Accounting Policies

Accounting PoliciesOf Canada Health Infoway

Description of  Accounting Policies


§ Cash reported on Infoway's balance sheet only includes bank balances.

§ Cash with investment managers and highly liquid short-term investments with a maturity of one year or less from the date of acquisition are considered as temporary investments.


§ Infoway's temporary and portfolio investments are classified as financial assets held for trading.

§ Assets held for trading are recognized at their fair value at the balance sheet date using the settlement date value.

§ Changes in measurements are recorded in deferred contributions. The fair value of investments is based on the quoted market prices.

Accounts Payable and Accrued Liabilities

§ Accounts payable and accrued liabilities are classified in “Other financial liabilities”.

§ Subsequent measurements are recorded at amortized cost using the effective interest method. These measurements generally correspond to cost.

§ Contribution is included when amount received exceeds the claimable amount for the year.

Capital Assets

§ Capital assets are carried at cost less accumulated amortization. Assets are amortized over their estimated useful lives using the straight-line method.

§ Tests for impairment will be conducted whenever there is an indication that the unit may be impaired; any loss is charged to operations.

Credit Risk and the Fair Value of Financial Assets and Financial Liabilities

§ Infoway adopted EIC-173 - Credit Risk and the Fair Value of Financial Assets and Financial Liabilities in early 2009.

§ The guideline indicates that when determining the fair value of financial assets and financial liabilities, the enmity's own credit risk and the credit risk of the counterparty should be taken into account.

Employee Future Benefit

§ Infoway has established a defined benefit pension plan for the President and Chief Executive Officer.

§ They accrue its obligations under the benefit plan and the related costs, net of plan assets.

§ The cost of the pension earned is actuarially determined using the projected benefit method prorated on services, a discount rate based on market interest rates at the measurement date on high quality debt instruments with cash flows that match the timing and amount of expected benefit payments and management's estimate of expected plan investment return, salary increase and retirement age. An actuarial estimate was made at year-end.

Financial Instruments

§ Infoway adopted section 3861 ‘Financial Instruments - Disclosure and Presentation' rather than sections 3862 and 3863.


§ Receivables and sales taxes recoverable are classified in “Loans and receivables” category.

§ Contribution receivable is included if claimable amount for the year exceeds the amount received.

§ Later measurements are recorded at amortized cost using the effective interest method. These measurements generally correspond to cost.

Revenue Recognition

§ Infoway uses the deferral method of accounting for contributions. Contributions are restricted for the purpose defined in the objectives of the Corporation and are recognized as revenue in the year in which the related expenses are incurred.

§ Investment income is recognized as revenue in the same manner.

§ Unspent restricted contributions are deferred if the related expenses from programs or projects have not occurred during the current reporting period.

§ Furthermore, contributions restricted for the purchase of capital assets are deferred and amortized into revenue on a straight-line basis.

Use of Estimates

§ GAAP requires corporations to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenue and expenses during the period.

4. Policy Differences

As a NFPO, not all policies applicable to profit-oriented entities can be applied. Like the sections in the CICA handbook (See Appendix), some can be categorized as general items which concern both NFPO and profit-oriented companies, but others pertain to one or the other. In this section we will run through the policies that are of no difference to either for-profit or non-profit organizations, and then we will review the accounting policies newly adopted then significantly different for Infoway.

Of the policies listed in section three, the majority adopted were no different than that of a profit-oriented entity. Infoway's accounting policy adopted for capital assets is the same as profit-oriented companies as they both record at cost, less accumulated amortization, and assess for impairment. The only possible difference could be the choice of depreciation method, which still would not differentiate a NFPO from a for-profit organization. Policies adopted for cash and other simple current asset and liability accounts do not differ from profit-oriented companies as well. Looking at the CICA Handbook's section applicability chart (See Appendix), 'Employee Future Benefits' should-like profit-oriented companies-apply to NFPOs with relevant transactions. In our case, Infoway's defined benefit plans were no different; hence the accounting policy adopted was the same. Lastly, Infoway's policy adopted for the use of estimates is the same as a for-profit organization because it is required by GAAP for all companies.

4.1. Newly Adopted Policies

Infoway adopted two new policies in 2009. The first accounting policy adopted was the 'Credit Risk and the Fair Value of Financial Assets and Financial Liabilities' policy. This accounting policy borne from the Emerging Issues Committee, coded as EIC-173, could have been treated differently for a NFPO compared to for-profit organizations; but because of the transactions that occurred within Infoway, they were treated no differently. The second was the 'Financial Instruments' policy. Technically speaking, this second accounting policy is no different for a NFPO as long as they hold relevant transactions like profit-oriented organizations. To understand why the two policies could have been treated differently by Infoway, we must first know how each of the policies are implemented and for what reasons.

EIC-173, also known as the 'Credit Risk and the Fair Value of Financial Assets and Financial Liabilities' policy came into action when the committee reached a consensus which required that all entities that apply Section 3855, Financial Instruments - Recognition And Measurement, to also apply the accounting treatment as described in the EIC-173 abstract retrospectively, with or without restatements.[9] Strictly speaking, EIC-173 applies to both NFPO and for-profit companies, but it is important here to note that Section 3855 may be treated differently for NFPOs.

As indicated by the section applicability chart in the appendix, Section 3855 may or may not be specific to NFPOs depending on the relevance of transactions. As it turns out, Section 3855.07 states that "An entity, other than a non-publicly accountable enterprise... or a not-for-profit organization... applies this section to all types of financial instruments except...."[10] Here we understand that section 3855 must be adopted only by public and for-profit companies who hold specific instruments. Yet section 3855.07A followed stating, "A non-publicly accountable enterprise...or a not-for-profit organization... applies this section in the same manner as other entities, except that such an entity may also make accounting policy choices not to apply this section to: derivatives embedded in leases, insurance contracts, contracts to buy or sell a non-financial item in accordance with the entity's expected purchase/sale/usage requirements, and contracts/obligations for stock-based payments in which the entity receives or acquires goods or services to which this Section otherwise applies."[11]

Depending on the circumstances, NFPOs may ignore EIC-173 if it had chosen not to apply section 3855 to the exempt items listed in 3855.07A. For-profit companies do not have this choice and would have to adopt EIC-173 if section 3855 applied. However, because Infoway has subsequently adopted this accounting policy, it may have either chosen to apply section 3855 on exempt items, or there were transactions that occurred which are not on the list of exemptions from section 3855.07A which requires accounting policies from section 3855 to be applied.

The second accounting policy adopted by Infoway for the year was the 'Financial Instruments' policy. Specifically, Infoway has adopted section 3861, 'Financial Instruments - Disclosure and Presentation' while disposing of previous sections applied which were section 3862, 'Financial Instruments - Disclosure' and section 3863, 'Financial Instruments - Presentation.' The policy adopted from section 3861 applies to NFPOs and is not different from that of profit-oriented companies as long it as holds relevant transactions or circumstances (See Appendix - 3861 Financial Instruments - Disclosure and Presentation). Since this policy is presented in their annual report, then they must have conducted similar transactions that put this policy into play. It is evident that Infoway is involved with financial instruments by the looks of its notes on investments, hence this policy was adopted. If Infoway did not have financial instruments then there would be no need to adopt the policy as described in section 3861, however this is no different for profit-oriented companies.

4.2. Significant Accounting Policies

Of the significant accounting policies adopted by Infoway over the years, two specific policies differ for a NFPO like Infoway when compared to for-profit companies. The first is revenue recognition and the second is investments.

Unlike profit-oriented companies, a NFPO does not recognize operational income; instead they receive another form of revenue such as endowments, and contributions. As explained in section 4410.11, contributions "are often subject to externally imposed restrictions that specify how the resources contributed are to be used or maintained ... [NFPOs must] show the extent to which the organization has been able to obtain resources to cover the expenses associated with service delivery for the period."[12] To achieve this, the NFPO must account for contributions with the deferral or the restricted fund method. As noted in section two of this paper, Infoway reports with the deferral method where contributions are matched with expenses that occur in the year. In other words, contributions are deferred until matching program expenses arise. For-profit organizations however, recognize income earned in the year and have the choice of deciding which expenses to cover with whichever stream of income desired.

Infoway recognizes externally restricted contributions from the Government of Canada as revenues in the year as long as relating expenses outlined in the restrictions arise. Infoway also receives contributions restricted for the purchase of capital assets which are deferred and realized over the light of the asset. This way the NFPO can illustrate to donors where the contributions are going and that they are adhering to the restrictions. Although investments are treated and classified like those in profit-oriented organizations, Infoway's accounting policy treats investment revenues as restricted contributions and is recorded as deferred contributions. The reason for this is because the original principle would have also been a contribution, so revenues generated must adhere to the original contribution restrictions. Profit-oriented companies would recognize investment income or gain/loss through the equity or cost method.

5. Unique Presentation and Disclosures

Infoway is focused on the "development and adoption of pan-Canadian electronic health information systems."[13] Given that the corporation's objective is to provide health information systems services to the public, it undergoes various projects and programs through government funded contributions. The nature of the corporation's initiatives leads to different presentation of the financial statements and disclosures unique to Infoway alone.

When reviewing the corporation's balance sheet, its assets are composed mainly of investments, whereas its expenses are mostly from expenses of future periods. The corporation typically receives money from two major sources: government funding and temporary or portfolio investments. For this reason, Infoway's notes to financial statements specifically disclose the details of its investment by classifying the different types of investments and its related amount. In addition, there is a supplementary chart in the notes to identify the change in deferred contributions throughout the year, along with its sources.

As a not-for-profit organization, Infoway would be focused on using its contribution to cover the costs arising from the types of projects or programs that the corporation is involved in. This information would also be particularly important to the corporation's stakeholders. Because of this, the programs and projects are grouped by categories and provided under the expenses section in the statement of operations. This presents clearly how the funding is allocated to the different types of projects for the organization. Moreover, this presentation can also outline where Infoway is putting its research emphasis on.

As mentioned in the manager's discussion and analysis of the annual report, "our program expenses are recognized on a milestone-completion basis"[14]. Hence, the corporation also discloses information on the number of projects approved, the cumulative amount of expenses, as well as actual versus estimated numbers. This additional information addresses the issue of the "inherent lag between project approvals and actual project expenditures"[15] to the organization's stakeholders. Since Infoway relies on the board's approval of funding to support the expenditures of its projects, it provides information on the differing figures between the actual amount of expenditure incurred and the projected amount planned ahead of time.

A large part of Infoway's commitments is to provide health care information systems. In its notes to financial statements, the corporation disclosed the different types of capital assets and the cost for each item. The details on depreciation are also provided to show the net book value for each category of capital assets.

Finally, in the last section of notes to financial statements, contractual and lease commitments are disclosed to show the portion of the unspent funding that is expected to be spent in the near future. A five year break-down is provided starting in the year 2010 to 2014. Most of the unspent funding would be used towards achieving its contractual commitments. The remaining would contribute to supporting the rent of operating premises.


Canada Health Infoway. Annual Report: Building a Healthy Legacy Together. Canada: Canada Health Infoway, 2008-2009.

Canadian Institute of Chartered Accountants. Sections 3855, 4400, 4410. CICA Handbook. Toronto: Knotia Canada Limited Partnership, 2010. (March 20 2010).

Murray W. Hilton & Darrell Herauf, Modern Advanced Accounting in Canada, 5th ed. (McGraw-Hill Ryerson Limited, 2008), Pp 628.

[1] Murray W. Hilton & Darrell Herauf, Modern Advanced Accounting in Canada, 5th ed.

[2] Canada Health Infoway. 2008-2009. Annual Report

[3] Murray W. Hilton & Darrell Herauf, Modern Advanced Accounting in Canada, 5th ed.

[4] Canada Health Infoway. 2008-2009. Annual Report

[5] Canada Health Infoway. 2008-2009. Annual Report

[6] Murray W. Hilton & Darrell Herauf, Modern Advanced Accounting in Canada, 5th ed.

[7] Canada Health Infoway. 2008-2009. Annual Report

[8] Canada Health Infoway. 2008-2009. Annual Report

[9] CICA, EIC-173, World Wide Web.

[10] CICA, Section 3855.07, World Wide Web.

[11] CICA, Section 3855.07A, World Wide Web.

[12] CICA, Section 4410, World Wide Web.

[13] Canada Health Infoway. 2008-2009. Annual Report

[14] Canada Health Infoway. 2008-2009. Annual Report

[15] Canada Health Infoway. 2008-2009. Annual Report

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