Canada Gazette, Part I, Volume 149, Number 19: GOVERNMENT NOTICES

May 9, 2015

BANK OF CANADA

FINANCIAL STATEMENTS (YEAR ENDED 31 DECEMBER 2014)

FINANCIAL REPORTING RESPONSIBILITY

The accompanying financial statements of the Bank of Canada (the Bank) have been prepared by management in accordance with International Financial Reporting Standards and contain certain items that reflect the best estimates and judgment of management. The integrity and reliability of the data in these financial statements are management's responsibility. Management is responsible for ensuring that all information in the Annual Report is consistent with the financial statements.

In support of its responsibility for the integrity and reliability of these financial statements and for the accounting system from which they are derived, management has developed and maintains a system of internal controls to provide reasonable assurance that transactions are properly authorized and recognized, that financial information is reliable, that the assets are safeguarded and liabilities recognized, and that the operations are carried out effectively. The Bank has an internal Audit Department whose functions include reviewing internal controls, including accounting and financial controls and their application.

The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal controls and exercises this responsibility through the Audit and Finance Committee of the Board. The Audit and Finance Committee is composed of members who are neither officers nor employees of the Bank and who are financially literate. The Audit and Finance Committee is therefore qualified to review the Bank's annual financial statements and to recommend their approval by the Board of Directors. The Audit and Finance Committee meets with management, the Chief Internal Auditor, and the Bank's independent auditors, who are appointed by order in council. The Audit and Finance Committee has established processes to evaluate the independence of the Bank's independent auditors and oversees all services provided by them. The Audit and Finance Committee has a duty to review the adoption of, and changes in, accounting principles and procedures that have a material effect on the financial statements, and to review and assess key management judgments and estimates material to the reported financial information.

These financial statements have been audited in 2014 by the Bank's independent auditors, Deloitte LLP and Ernst & Young LLP, and their report is presented herein. The financial statements of the Bank for the year ended 31 December 2013, were audited by Deloitte LLP and KPMG LLP. The independent auditors have full and unrestricted access to the Audit and Finance Committee to discuss their audit and related findings.

Ottawa, Canada, 13 February 2015

STEPHEN S. POLOZ
Governor

CARMEN VIERULA, CPA, CA
Chief Financial Officer and Chief Accountant

INDEPENDENT AUDITORS' REPORT

To the Minister of Finance, registered shareholder of the Bank of Canada (the “Bank”)

We have audited the accompanying financial statements of the Bank, which comprise the statement of financial position as at 31 December 2014 and the statements of net income and comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising 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 International Financial Reporting Standards, 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. 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 an 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 our 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, we 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 in our audit is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Bank as at 31 December 2014 and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Other matter

The financial statements of the Bank for the year ended 31 December 2013, were audited by Deloitte LLP and KPMG LLP, who expressed an unmodified opinion on those statements on 13 February 2014.

Ottawa, Canada, 13 February 2015

DELOITTE LLP
Chartered Professional Accountants
Chartered Accountants
Licensed Public Accountants

ERNST & YOUNG LLP
Chartered Professional Accountants
Licensed Public Accountants

BANK OF CANADA

Statement of financial position (Millions of Canadian dollars)

	31 December 2014	As at 31 December 2013
ASSETS
Cash and foreign deposits (note 4)	8.4	5.0
Loans and receivables
Securities purchased under resale agreements (note 5)	2,764.8	2,205.9
Advances to members of the Canadian Payments Association (note 5)	-	-
Other receivables	3.6	9.0
	2,768.4	2,214.9
Investments (notes 6, 7, 8)
Government of Canada treasury bills	19,386.5	21,586.4
Government of Canada bonds	71,084.7	66,653.6
Other investments	355.2	337.1
	90,826.4	88,577.1
Property and equipment (note 9)	283.9	232.4
Intangible assets (note 10)	43.8	52.2
Other assets (note 11)	181.2	224.1
Total assets	94,112.1	91,305.7
LIABILITIES AND EQUITY
Bank notes in circulation (notes 7, 12)	70,023.5	66,615.9
Deposits (notes 7, 13)
Government of Canada	21,526.6	22,329.9
Members of the Canadian Payments Association	150.1	186.7
Other deposits	1,518.9	1,306.9
	23,195.6	23,823.5
Other liabilities (note 14)	443.7	431.1
	93,662.8	90,870.5
Equity (note 16)	449.3	435.2
Total liabilities and equity	94,112.1	91,305.7

Commitments, contingencies and guarantees (notes 17, 18)

STEPHEN S. POLOZ
Governor

DEREK D. KEY
Lead Director
Board of Directors

CARMEN VIERULA, CPA, CA
Chief Financial Officer and
Chief Accountant

PHYLLIS CLARK
Chair
Audit and Finance Committee

(See accompanying notes to the financial statements.)

BANK OF CANADA

Statement of net income and comprehensive income (Millions of Canadian dollars)

	For the year ended
	31 December 2014	31 December 2013
INCOME Interest revenue
Interest earned on investments	1,808.6	1,770.7
Dividend revenue	3.3	4.7
Interest earned on securities purchased under resale agreements	2.5	3.8
Other interest revenue	0.2	0.3
	1,814.6	1,779.5
Interest expense
Interest expense on deposits	(218.2)	(210.6)
NET INTEREST INCOME	1,596.4	1,568.9
Other revenue	8.2	11.1
Total income	1,604.6	1,580.0
EXPENSES
Staff costs	191.3	213.6
Bank note research, production and processing	99.6	158.8
Premises costs	51.0	38.3
Technology and telecommunications	34.6	42.1
Depreciation and amortization	37.6	46.2
Other operating expenses	63.7	75.0
Total expenses	477.8	574.0
NET INCOME	1,126.8	1,006.0
OTHER COMPREHENSIVE INCOME (LOSS) Items that will not be reclassified to net income
Remeasurements of the net defined-benefit liability/asset	(101.4)	224.7
Items that may be reclassified subsequently to net income
Change in fair value of available-for-sale financial assets	14.1	(3.3)
Other comprehensive income (loss)	(87.3)	221.4
COMPREHENSIVE INCOME	1,039.5	1,227.4

(See accompanying notes to the financial statements.)

BANK OF CANADA

Statement of changes in equity (Millions of Canadian dollars)

				For the year ended 31 December
	Share capital	Statutory reserve	Special reserve	Available-for-sale reserve	Retained earnings	Total
Balance, 1 January 2014	5.0	25.0	100.0	305.2	-	435.2
Comprehensive income for the period
Net income	-	-	-	-	1,126.8	1,126.8
Remeasurements of the net defined-benefit liability/asset	-	-	-	-	(101.4)	(101.4)
Change in fair value of BIS shares	-	-	-	18.1	-	18.1
Change in fair value of Government of Canada treasury bills	-	-	-	(4.0)	-	(4.0)
	-	-	-	14.1	1,025.4	1,039.5
Transfer to Receiver General for Canada	-	-	-	-	(1,025.4)	(1,025.4)
Balance, 31 December 2014	5.0	25.0	100.0	319.3	-	449.3

				For the year ended 31 December
	Share capital	Statutory reserve	Special reserve	Available-for-sale reserve	Retained earnings	Total
Balance, 1 January 2013	5.0	25.0	100.0	308.5	-	438.5
Comprehensive income for the period
Net income	-	-	-	-	1,006.0	1,006.0
Remeasurements of the net defined-benefit liability/asset	-	-	-	-	224.7	224.7
Change in fair value of BIS shares	-	-	-	(5.6)	-	(5.6)
Change in fair value of Government of Canada treasury bills	-	-	-	2.3	-	2.3
	-	-	-	(3.3)	1,230.7	1,227.4
Transfer to Receiver General for Canada	-	-	-	-	(1,230.7)	(1,230.7)
Balance, 31 December 2013	5.0	25.0	100.0	305.2	-	435.2

(See accompanying notes to the financial statements.)

BANK OF CANADA

Statement of cash flows (Millions of Canadian dollars)

For the year ended

	31 December 2014	31 December 2013
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received	1,870.1	1,817.0
Dividends received	3.3	4.7
Other revenue received	13.0	7.3
Interest paid	(218.2)	(210.6)
Payments to or on behalf of employees/suppliers and to members of the Canadian Payments Association	(482.7)	(515.7)
Net decrease in advances to members of the Canadian Payments Association	-	61.8
Net increase (decrease) in deposits	(627.9)	10,532.2
Proceeds from maturity of securities purchased under resale agreements	21,321.1	57,969.7
Acquisition of securities purchased under resale agreements	(21,878.4)	(58,337.3)
Repayments of securities sold under repurchase agreements	(229.9)	(3,653.9)
Proceeds from securities sold under repurchase agreements	229.9	3,653.9
Net cash provided by operating activities	0.3	11,329.1
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease (increase) in Government of Canada treasury bills	2,180.4	(2,582.0)
Purchases of Government of Canada bonds	(18,109.8)	(18,213.5)
Proceeds from maturity of Government of Canada bonds	13,634.0	7,780.0
Additions of property and equipment	(76.8)	(66.3)
Additions of intangible assets	(3.9)	(6.0)
Net cash used in investing activities	(2,376.1)	(13,087.8)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in bank notes in circulation	3,407.6	2,915.9
Remittance of ascertained surplus to the Receiver General for Canada	(1,028.7)	(1,159.2)
Net cash provided by financing activities	2,378.9	1,756.7
EFFECT OF EXCHANGE RATE CHANGES ON FOREIGN CURRENCY	0.3	0.2
INCREASE (DECREASE) IN CASH AND FOREIGN DEPOSITS	3.4	(1.8)
CASH AND FOREIGN DEPOSITS, BEGINNING OF YEAR	5.0	6.8
CASH AND FOREIGN DEPOSITS, END OF YEAR	8.4	5.0

(See accompanying notes to the financial statements.)

BANK OF CANADA

Notes to the financial statements
For the year ended 31 December 2014

(Amounts in the notes to the Financial Statements of the Bank of Canada are in millions of Canadian dollars, unless otherwise stated.)

1. The business of the Bank of Canada

The Bank of Canada (the Bank) is the nation's central bank. The Bank is a corporation under the Bank of Canada Act, is wholly owned by the Government of Canada and is exempt from income taxes. The Bank is a Government Business Enterprise as defined by the Canadian Public Sector Accounting Standards and, as such, adheres to the standards applicable to publicly accountable enterprises as outlined by the Chartered Professional Accountants of Canada (CPA Canada).

The address of the registered head office is 234 Laurier Avenue West, Ottawa, Ontario.

The responsibilities of the Bank focus on the goals of low and stable inflation, financial system stability, a safe and secure currency, and the efficient management of government funds and public debt. These responsibilities are carried out as part of the broad functions described below.

• Monetary policy
• Contributes to solid economic performance and rising living standards for Canadians by keeping inflation low, stable and predictable.
• Financial system
• Promotes the stability and efficiency of Canada's financial system, both within Canada and globally.
• Currency
• Designs, produces and distributes Canada's bank notes and replaces worn notes. The Bank deters counterfeiting through leading-edge bank note design, public education and collaboration with law-enforcement agencies.
• Funds management
• Provides effective and efficient funds-management services for the Government of Canada, and administers and advises on the public debt and foreign exchange reserves. In addition, the Bank provides banking services to foreign central banks, as well as to critical payment clearing and settlement systems.

The Bank's activities and operations are undertaken in support of its core mandate and not with the objective of generating revenue or profits. It does not offer banking services to the public. The Bank has the exclusive right to issue Canadian bank notes, and the face value of these bank notes is the most significant liability on the Bank's balance sheet. The Bank invests the proceeds from the issuance of bank notes into Government of Canada securities, which are acquired on a non-competitive basis. These assets enable the Bank to execute its responsibilities for the monetary policy and financial system functions.

Interest income derived from Government of Canada securities is the Bank's primary source of revenue each year. The income generated from the assets backing the bank notes in circulation (net of bank note production and distribution costs) is referred to as “seigniorage,” which provides a stable and constant source of funding for the Bank's operations, enabling it to function independently of government appropriations. A portion of this revenue is used to fund the Bank's operations and reserves; the remaining net income is remitted to the Receiver General in accordance with the requirements of the Bank of Canada Act.

2. Basis of preparation

Compliance with International Financial Reporting Standards (IFRS)

These financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board and conform to the disclosure and accounting requirements of the Bank of Canada Act and the Bank's bylaws.

The Board of Directors approved the financial statements on 13 February 2015.

Measurement base

The financial statements have been prepared on a historical cost basis, except for the available-for-sale (AFS) financial assets, which are measured at fair value, and the net defined-benefit liability/asset of employee benefit plans, which is recognized as the net of the fair value of plan assets and the present value of the defined-benefit obligation.

Significant accounting estimates and judgments in applying accounting policies

The preparation of the financial statements requires management to make judgments, estimates and assumptions based on information available at the statement date that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses, as well as related information. The Bank based its assumptions and estimates on information that was available when these financial statements were prepared. Existing circumstances and assumptions about future developments may change, however, in response to market fluctuations or circumstances that are beyond the control of the Bank. In such cases, the impact will be recognized in the financial statements of a future fiscal period.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Significant estimates are primarily in the area of the fair values of certain financial instruments and collateral taken (note 8) and employee benefits (note 15).

Functional and presentation currency

The Bank's functional and presentation currency is the Canadian dollar.

Fiscal-agent and custodial activities

Responsibility for the operational management of the Government of Canada's financial assets and liabilities is borne jointly by the Bank (as fiscal agent for the Government of Canada) and the Department of Finance. In this fiscal-agent role, the Bank provides transactional and administrative support to the Government of Canada in certain areas. The assets, liabilities, expenditures and revenues to which this support relates are those of the Government of Canada and are not included in the financial statements of the Bank.

Securities safekeeping and gold custodial activities are provided to foreign central banks and international organizations. The assets, and income arising therefrom, are excluded from these financial statements, since they are not assets or income of the Bank.

3. Significant accounting policies

This section contains the Bank's accounting policies that relate to the financial statements as a whole. Significant accounting policies specific to a note are included within that note. Accounting policies related to non-material items are not included in these financial statements.

There were no new or amended standards adopted by the Bank during fiscal 2014 that had a material impact on its financial statements.

Translation of foreign currencies

Investment income and expenses denominated in foreign currencies are translated at the exchange rate in effect at the date of the transaction. Fair-value items denominated in foreign currencies are translated at the exchange rate in effect at the date of the fair-value measurement. Monetary assets and liabilities denominated in foreign currencies are translated into Canadian dollars at the rates of exchange prevailing at the end of the reporting period. The resulting gains and losses are included in Other revenue. Gains or losses on equity investments classified as AFS, along with any exchange-related gains or losses, are recognized in the available-for-sale reserve within Other Comprehensive Income.

Impairment of financial assets

For financial assets that are not classified at fair value through net income, the Bank assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of assets is impaired. Once impaired, financial assets carried at amortized cost are remeasured at the net recoverable amount, with the amount of impairment recognized in net income. Unrealized losses on impaired AFS financial assets are recognized in net income at the time of impairment.

Impairment of non-financial assets

Non-financial assets, including property and equipment, and intangible assets, are reviewed annually for impairment and whenever events or changes in circumstances indicate that the carrying amount exceeds its recoverable amount.

Intangible assets under development are assessed for impairment on an annual basis.

Revenue recognition

Interest revenue earned on Government of Canada treasury bills and bonds is recognized in net income using the effective interest method. Dividend revenue on the Bank for International Settlements (BIS) shares is recognized as dividends are declared.

Realized gains (losses) on the sale of Government of Canada treasury bills are recognized in net income at the time of sale as a reclassification from Other Comprehensive Income and are calculated as the excess of proceeds over the amortized cost at the transaction date.

Interest earned on securities purchased under resale agreements is recognized using the effective interest method.

Other revenue is primarily composed of interest earned on advances to members of the Canadian Payments Association (CPA) and is recognized using the effective interest method.

Future changes in accounting policies

The following new standards issued by the International Accounting Standards Board (IASB) were assessed as having a possible effect on the Bank in the future. The Bank is currently determining the impact of these standards on its financial statements.

IFRS 9 Financial Instruments (IFRS 9)

• In July 2014, the IASB issued the final version of IFRS 9, Financial Instruments, bringing together the classification and measurement, impairment and hedge accounting phases of the IASB's project to replace IAS 39, Financial Instruments: Recognition and Measurement.
• IFRS 9 eliminates the existing financial asset categories and adopts a logical approach to the classification of financial assets driven by cash-flow characteristics and the business model in which an asset is held.
• IFRS 9 introduces a new impairment model that results in a single impairment model being applied to all financial instruments. In addition, this new expected loss impairment model will require more timely recognition of expected credit losses.
• IFRS 9 also includes a new hedge accounting model, together with corresponding disclosures about risk-management activities for those applying hedge accounting. The new model represents a substantial overhaul of hedge accounting that will enable entities to better reflect their risk management activities in their financial statements. The most significant improvements apply to those entities that hedge non-financial risk.
• The IASB has set 1 January 2018 as the mandatory effective date for the adoption of IFRS 9, although early adoption is permitted. The Bank is currently evaluating the impact of IFRS 9 on its financial statements.

IFRS 15 Revenue from contracts with customers (IFRS 15)

• IFRS 15, as issued in May 2014, relates to the recognition of revenue that applies to all contracts with customers (except for contracts that are within the scope of the standards on leases, insurance contracts and financial instruments).
• IFRS 15 establishes a five-step model to apply to revenue from contracts and extensive requirements for revenue disclosure. The standard also addresses the recognition and measurement of gains and losses on the sale of some non-financial assets that are not an output of the entity's ordinary activities.
• The IASB has set 1 January 2017 as the mandatory effective date for the adoption of IFRS 15, although early adoption is permitted. The Bank is currently evaluating the impact of IFRS 15 on its financial statements.

4. Cash and foreign deposits

Cash and foreign deposits is composed of cash on hand as well as highly liquid demand deposits in foreign currencies with other central banks or international financial institutions. Included in this balance is Can$7.9 million (Can$4.6 million at 31 December 2013) of foreign deposits. Credit risk related to these foreign deposits is discussed in note 8.

5. Loans and receivables

Loans and receivables is composed primarily of securities purchased under resale agreements and, if any, advances to members of the CPA. These transactions are fully collateralized in accordance with publicly disclosed collateral eligibility and margin requirements. Financial risks related to these instruments are discussed in note 8.

Accounting policy

Securities purchased under resale agreements for terms of one business day are acquired to reinforce the target overnight interest rate. Securities are acquired through buyback transactions with primary dealers where the counterparties may accept an amount up to their pre-specified limit.

Securities purchased under resale agreements for terms of longer than one business day are acquired through an auction process. Details of these auctions are announced by the Bank in advance. Bids are submitted on a yield basis, and funds are allocated in descending order of bid yields.

Securities purchased under resale agreements are reverse repo-type transactions in which the Bank purchases securities from designated counterparties with an agreement to sell them back at a predetermined price on an agreed transaction date. For accounting purposes, these agreements are treated as collateralized lending transactions and are recognized on the Statement of Financial Position at the amounts at which the securities were originally acquired, plus accrued interest.

Securities purchased under resale agreements

Balances outstanding at 31 December 2014 consist of agreements with original terms to maturity of 24 days. (Balances outstanding at 31 December 2013 consist of agreements with original terms to maturity of 21 days.)

Advances to members of the Canadian Payments Association

Advances to members of the Canadian Payments Association (CPA) are typically composed of liquidity loans made under the Bank's Standing Liquidity Facility. These advances mature the next business day. Interest on overnight advances is calculated at the Bank Rate. The Bank Rate is the rate of interest that the Bank charges on one-day loans to major financial institutions.

6. Securities lending program

The Bank operates a Securities-Lending Program to support the liquidity of Government of Canada securities by providing the market with a secondary and temporary source of these securities. These securities-lending transactions are fully collateralized by securities and are generally one business day in duration.

Accounting policy

The securities loaned continue to be accounted for as investment assets. Lending fees charged by the Bank on these transactions are included in Other revenue at the maturity date of the transaction.

Securities lending

As at 31 December 2014, the Bank's investments included loaned securities with a fair market value of $185.8 million ($129.7 million at 31 December 2013) and an amortized cost of $175.0 million ($119.5 million at 31 December 2013). Collateral held against investments loaned under securities lending at the end of the reporting period was in the form of securities issued or guaranteed by the Government of Canada. The fair value of collateral held totalled $190.5 million, representing 102 per cent of the fair market value of the securities loaned.

7. Financial instruments

The Bank's financial instruments consist of cash and foreign deposits, securities purchased under resale agreements, advances to members of the CPA, other receivables, investments (consisting of Government of Canada treasury bills, Government of Canada bonds and other investments), bank notes in circulation, deposits and other liabilities (excluding the net defined-benefit liability for pension benefit plans and other employee benefit plans).

In Other investments, the Bank holds 9 441 BIS shares (9 441 BIS shares at 31 December 2013) in order to participate in the BIS. Ownership of BIS shares is limited to central banks, and new shares can only be acquired following an invitation to subscribe extended by the BIS Board of Directors. The shares are non-transferable unless prior written consent is obtained from the BIS. The fair value of the BIS shares totalled $355.2 million ($337.1 million at 31 December 2013).

Accounting policy

The Bank accounts for all financial instruments using settlement-date accounting. Financial instruments are measured at fair value on initial recognition, plus transaction costs, if any, for all financial assets not carried at fair value through net income. Subsequent to initial recognition, they are accounted for based on their classification.

Subsequent to initial recognition, financial assets classified as AFS are measured at fair value using quoted market prices, with the exception of the BIS shares, which are measured using significant non-observable inputs. Unrealized changes in the values of AFS financial assets measured at fair value are recognized in Other Comprehensive Income and accumulated in the Available-for-sale reserve in Equity until the financial asset is derecognized or becomes impaired. At that time, the cumulative unrealized gain or loss previously recognized in Other Comprehensive Income is reclassified from Equity to Net income. The Bank's financial assets designated as AFS consist of Government of Canada treasury bills and other investments, which include BIS shares.

Financial assets that the Bank has the intent and ability to hold to maturity are classified as held-to-maturity (HTM). Subsequent to initial recognition, financial assets classified as HTM are measured at amortized cost using the effective interest method less any impairment losses. The effective interest method uses the rate inherent in a financial instrument that discounts the estimated future cash flows over the expected life of the financial instrument in order to recognize interest on a constant-yield basis. Government of Canada bonds are classified as HTM.

The Bank has not classified any of its financial assets at fair value through net income, other than cash and foreign deposits.

All other financial assets are classified as loans and receivables. Subsequent to initial recognition, these are measured at amortized cost less any impairment losses using the effective interest method.

The Bank derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire. On derecognition of a financial asset measured at amortized cost, the difference between the asset's carrying amount and the sum of the consideration received and receivable is recognized in net income.

The Bank has classified its financial liabilities as other liabilities. These liabilities are initially recognized at fair value. Subsequent to initial recognition, financial liabilities are measured at amortized cost using the effective interest method, with the exception of bank notes in circulation, which are measured at face value. The Bank has not classified any of its financial liabilities at fair value through net income.

The Bank derecognizes financial liabilities when the Bank's obligations are discharged, cancelled or expire. The difference between the carrying amount of the financial liability derecognized and the sum of the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognized in net income.

Securities sold under repurchase agreements are repo-type transactions in which the Bank sells Government of Canada securities to designated counterparties with an agreement to buy them back at a predetermined price on an agreed transaction date. For accounting purposes, these agreements are treated as collateralized borrowing transactions and are recognized on the Statement of Financial Position at the amounts at which the securities were originally sold, plus accrued interest.

Measurement of financial instruments

Cash and foreign deposits, Government of Canada treasury bills, and BIS shares are measured at fair value. All other financial instruments are measured at amortized cost using the effective interest method, with the exception of bank notes in circulation, which are measured at face value.

Financial instruments measured at fair value

Financial instruments measured at fair value are classified using a fair-value hierarchy that reflects the significance of the inputs used in making the measurements:

• Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2 — inputs other than quoted prices included in Level 1 that are observable for the assets or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3 — inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

The fair-value hierarchy requires the use of observable market inputs wherever such inputs exist. In measuring fair value, a financial instrument is classified at the lowest level of the hierarchy for which a significant input has been considered.

	Level 1	Level 2	Level 3	Total
Financial assets at fair value as at 31 December 2014
Government of Canada treasury bills	19,386.5	-	-	19,386.5
BIS shares	-	-	355.2	355.2
	19,386.5	-	355.2	19,741.7
Financial assets at fair value as at 31 December 2013
Government of Canada treasury bills	21,586.4	-	-	21,586.4
BIS shares	-	-	337.1	337.1
	21,586.4	-	337.1	21,923.5

There were no transfers of amounts between levels in 2014.

The fair value of the BIS shares is estimated to be 70 per cent of the Bank's interest in the net asset value (NAV) of the BIS at the reporting date. This formula is equivalent to the methodology applied by the BIS to determine the pricing of any new shares issued. While the Bank considers that the 30 per cent discount against the net asset value of the BIS continues to be the appropriate basis for valuation, the valuation inputs are not considered to be observable, and a 5 per cent change in the discount to the NAV would not have a material impact on the fair value of the BIS shares. There were no changes to the valuation technique during the year.

The following table reconciles the estimated fair value of the BIS shares determined using Level 3 fair-value measurements:

	31 December 2014	31 December 2013
Opening balance at beginning of period	337.1	342.7
Change in fair value recorded through Other Comprehensive Income	18.1	(5.6)
Closing balance at period-end	355.2	337.1

Financial instruments not measured at fair value

Fair values of Government of Canada bonds are determined based on unadjusted quoted market prices in an active market (Level 1). The fair value of Government of Canada bonds is $75,630.7 million at 31 December 2014 ($68,622.2 million at 31 December 2013).

8. Financial risk management

The Bank has a well-established framework for identifying, managing and monitoring pertinent areas of risk. This framework is supported by the Board of Directors, which ensures that the Bank has a robust risk-management process in place. The Bank is exposed to financial risk (credit risk, market risk and liquidity risk) associated with the management of the Bank's financial assets and liabilities. The Financial Risk Office, which is independent of operations, monitors and reports on the financial risks relating to the Bank's Statement of Financial Position. The following is a description of those risks and how the Bank manages its exposure to them.

Credit risk

Credit risk is the risk that a counterparty to a financial contract will fail to discharge its obligations in accordance with agreed-upon terms.

The Bank is exposed to credit risk through its cash and foreign deposits, investment portfolio, and advances to members of the CPA, and through market transactions conducted in the form of securities purchased under resale agreements and loans of securities. The maximum exposure to credit risk is estimated to be the carrying value of the items listed above. There are no past due or impaired amounts.

Advances to members of the CPA, securities purchased under resale agreements and securities loaned are fully collateralized loans. Collateral is taken in accordance with the Bank's publicly disclosed eligibility criteria and margin requirements, which are accessible on its Web site. Strict eligibility criteria are set for all collateral, and the Bank requires excess collateral relative to the size of the loan provided.

In the unlikely event of a counterparty default, collateral can be liquidated to offset credit exposure. The credit quality of collateral is managed through a set of restrictions based on asset type, term to maturity and the credit ratings of the securities pledged.

Concentration of credit risk

The credit risk associated with the Bank's investment portfolio, representing 97 per cent of the carrying value of its total assets (97 per cent in 2013), is low because the securities held are primarily direct obligations of the Government of Canada, which holds a credit rating of AAA. The Bank's advances to members of the CPA and securities purchased under resale agreements, representing 3 per cent of the carrying value of its total assets (2 per cent in 2013), are collateralized obligations of various Canadian-based financial institutions.

Collateral held against securities purchased under resale agreements at the end of the reporting period was in the form of securities issued or guaranteed by the Government of Canada. The fair value of collateral held totalled $2,868.4 million, representing 104 per cent of the amortized cost of $2,764.8 million ($2,250.6 million, representing 102 per cent of the amortized cost at 31 December 2013).

The Bank is exposed to credit risk through its guarantee of the Large Value Transfer System (LVTS) and through the execution of foreign currency contracts. The maximum exposure under guarantees and foreign currency contracts is described in note 18.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Bank's investment in Government of Canada treasury bills and bonds counteracts the non-interest-bearing bank notes in circulation liability and supports the Bank's operational independence to conduct monetary policy. These assets are acquired in proportions that broadly resemble the structure of the Government of Canada's domestic debt outstanding in order to reduce interest rate risk from the perspective of the Government of Canada.

The Bank's exposure to fair-value interest rate risk arises principally through its investment in Government of Canada treasury bills, which are short-term in duration, and Government of Canada bonds. The fair value of the Government of Canada treasury bills portfolio held by the Bank is exposed to fluctuations because of changes in market interest rates. Unrealized gains and losses on the Government of Canada treasury bill portfolio are recognized in the Available-for-sale reserve in the Equity section of the Statement of Financial Position until they mature or are sold. Government of Canada bonds are carried at amortized cost and are acquired with the intention of holding them to maturity. All other financial assets or liabilities with an interest rate component are carried at amortized cost or at face value.

The Bank's revenue will vary over time in response to future movements in interest rates. These variations would not affect the ability of the Bank to fulfill its obligations, since its revenues greatly exceed its expenses.

The figures below show the effect at 31 December of an (increase)/decrease of 25 basis points in interest rates on the fair value of the Government of Canada treasury bill portfolio and on other comprehensive income.

	31 December 2014	31 December 2013
Government of Canada treasury bills	(17.5) / 16.9	(17.6) / 17.0

The Bank's exposure to interest rate risk in the form of fluctuations in future cash flows of existing financial instruments is limited to Government of Canada deposits, and cash and foreign deposits, since these instruments are subject to variable interest rates. The remainder of the Bank's financial assets and liabilities have either fixed interest rates or are non-interest-bearing.

The figures below show the effect at 31 December of an increase/(decrease) of 25 basis points in interest rates on the interest expenses paid on Government of Canada deposits.

	31 December 2014	31 December 2013
Interest expense on Government of Canada deposits	57.1 / (57.1)	51.3 / (51.3)

For all financial instruments, except bank notes in circulation, the future cash flows of the Bank are dependent on the prevailing market rate of interest at the time of renewal.

The following table illustrates interest rate risk relative to future cash flows by considering the expected maturity or repricing dates of existing financial assets and liabilities.

As at 31 December 2014

	Non-interest-sensitive	Within 12 months	1 to 5 years	Over 5 years	Total
Financial Assets
Cash and foreign deposits	-	8.4	-	-	8.4
Loans and receivables (see reference 1)	3.6	2,764.8	-	-	2,768.4
Investments
Government of Canada treasury bills	-	19,386.5	-	-	19,386.5
Government of Canada bonds (see reference 2)	-	12,031.7	35,162.0	23,891.0	71,084.7
Shares in the BIS	355.2	-	-	-	355.2
	358.8	34,191.4	35,162.0	23,891.0	93,603.2

As at 31 December 2014

	Non-interest-sensitive	Within 12 months	1 to 5 years	Over 5 years	Total
Financial Liabilities
Bank notes in circulation	70,023.5	-	-	-	70,023.5
Deposits
Government of Canada	-	21,526.6	-	-	21,526.6
Members of the CPA	-	150.1	-	-	150.1
Other deposits	577.3	941.6	-	-	1,518.9
Other financial liabilities	238.9	-	-	-	238.9
	70,839.7	22,618.3	-	-	93,458.0
Interest rate sensitivity gap	(70,480.9)	11,573.1	35,162.0	23,891.0	145.2

As at 31 December 2014

	Non-interest-sensitive	Within 12 months	1 to 5 years	Over 5 years	Total
Financial Assets
Cash and foreign deposits	-	5.0	-	-	5.0
Loans and receivables (see reference 3)	9.0	2,205.9	-	-	2,214.9
Investments
Government of Canada treasury bills	-	21,586.5	-	-	21,586.5
Government of Canada bonds (see reference 4)	-	13,706.3	32,040.8	20,906.5	66,653.6
Shares in the BIS	337.1	-	-	-	337.1
	346.1	37,503.7	32,040.8	20,906.5	90,797.1
Financial Liabilities
Bank notes in circulation	66,615.9	-	-	-	66,615.9
Deposits
Government of Canada	-	22,329.9	-	-	22,329.9
Members of the CPA	-	186.7	-	-	186.7
Other deposits	532.7	774.2	-	-	1,306.9
Other financial liabilities	254.4	-	-	-	254.4
	67,403.0	23,290.8	-	-	90,693.8
Interest rate sensitivity gap	(67,056.9)	14,212.9	32,040.8	20,906.5	103.3

• Reference 1
  Securities purchased under resale agreements are interest-bearing assets. Other receivables are non-interest-sensitive.
• Reference 2
  Interest payments on Government of Canada bonds are classified according to their coupon date.
• Reference 3
  Securities purchased under resale agreements are interest-bearing assets. Other receivables are non-interest-sensitive.
• Reference 4
  Interest payments on Government of Canada bonds are classified according to their coupon date.

Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Given the small size of the Bank's net foreign currency exposure relative to its total assets, currency risk is not considered significant.

The Bank is exposed to currency risk primarily by holding shares in the BIS. These shares are denominated in Special Drawing Rights (SDRs). The SDR serves as the unit of account for the International Monetary Fund (IMF) and its value is based on a “basket” of four major currencies: the euro, the U.S. dollar, the pound sterling and the Japanese yen. SDRs are translated into Canadian-dollar equivalents at the rates prevailing on the date when the fair value is determined.

Other price risk

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from changes in interest and exchange rates), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or by factors affecting all similar financial instruments traded in the market.

The Bank is exposed to other price risk through its investment in the BIS. For accounting purposes, the Bank treats BIS shares as AFS and the fair value of these shares is estimated on the basis of the net asset value of the BIS, less a discount of 30 per cent. Accordingly, these shares are revalued to reflect movements in the net asset value of the BIS and in the Canadian dollar. The other price risk faced on BIS shares is incidental to the general reasons for holding them and is immaterial compared with other market risks faced by the Bank.

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liabilities with no fixed maturity include Bank notes in circulation and Government of Canada deposits. Historical experience has shown that bank notes in circulation provide a stable source of long-term funding for the Bank. Government of Canada deposits are deposits held in the Bank's capacity as the Government of Canada's fiscal agent. As a counterpart to this non-interest-bearing liability with no fixed maturity, the Bank holds a portfolio of highly liquid, interest- bearing securities. In the event of an unexpected redemption of bank notes or a significant withdrawal from the Government of Canada's deposit for the prudential liquidity-management plan, the Bank has the ability to settle the obligation by means of several tools.

As the nation's central bank, the Bank is the ultimate source of liquid funds to the Canadian financial system and has the power and operational ability to create Canadian-dollar liquidity in unlimited amounts at any time. This power is exercised within the Bank's commitment to keep inflation low, stable and predictable.

The Bank is exposed to liquidity risk through its guarantee of the LVTS. The maximum exposure under this guarantee is described in note 18.

The following table presents a maturity analysis of the Bank's financial assets and liabilities. The balances in this table do not correspond to the balances in the Statement of Financial Position, since the table presents all cash flows on an undiscounted basis.

In cases where counterparties to securities purchased under resale agreements substitute collateral after the outset of an agreement, portions of the carrying values presented may mature earlier than as presented, where the amount maturing early is dependent on the value of the collateral being substituted. Where collateral has been substituted, agreements are typically re-established under the same terms and conditions. The information presented in the following table is prepared according to agreements in place as at 31 December 2014 and 31 December 2013, respectively.

As at 31 December 2014

	No fixed maturity	Within 12 months	1 to 5 years	Over 5 years	Total
FINANCIAL ASSETS
Cash and foreign deposits	8.4	-	-	-	8.4
Loans and receivables	-	2,768.4	-	-	2,768.4
Investments
Government of Canada treasury bills	-	19,450.0	-	-	19,450.0
Government of Canada bonds	-	11,986.8	35,040.0	23,123.8	70,150.6
Shares in the BIS	355.2	-	-	-	355.2
	363.6	34,205.2	35,040.0	23,123.8	92,732.6
FINANCIAL LIABILITIES
Bank notes in circulation	70,023.5	-	-	-	70,023.5
Deposits
Government of Canada	21,526.6	-	-	-	21,526.6
Members of the CPA	-	150.1	-	-	150.1
Other deposits	1,518.9	-	-	-	1,518.9
Other financial liabilities	-	238.9	-	-	238.9
	93,069.0	389.0	-	-	93,458.0
Net maturity difference	(92,705.4)	33,816.2	35,040.0	23,123.8	(725.4)

As at 31 December 2013

	No fixed maturity	Within 12 months	1 to 5 years	Over 5 years	Total
FINANCIAL ASSETS
Cash and foreign deposits	5.0	-	-	-	5.0
Loans and receivables	-	2,214.9	-	-	2,214.9
Investments
Government of Canada treasury bills	-	21,650.0	-	-	21,650.0
Government of Canada bonds	-	13,634.0	31,971.8	20,158.8	65,764.6
Shares in the BIS	337.1	-	-	-	337.1
	342.1	37,498.9	31,971.8	20,158.8	89,971.6
FINANCIAL LIABILITIES
Bank notes in circulation	66,615.9	-	-	-	66,615.9
Deposits
Government of Canada	22,329.9	-	-	-	22,329.9
Members of the CPA	-	186.7	-	-	186.7
Other deposits	1,306.9	-	-	-	1,306.9
Other financial liabilities	-	254.4	-	-	254.4
	90,252.7	441.1	-	-	90,693.8
Net maturity difference	(89,910.6)	37,057.8	31,971.8	20,158.8	(722.2)

9. Property and equipment

Accounting policy

Property and equipment consists of land, buildings, computer equipment, other equipment and related projects in progress. Property and equipment is measured at cost less accumulated depreciation, except for land, which is not depreciated, and is net of any related impairment losses. Projects in progress are measured at cost but are not depreciated until the asset is available for use. Cost includes expenditures that are directly attributable to the acquisition or construction of the asset.

When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment. Upon replacing a significant part of an item of property and equipment, the carrying amount of the replaced part is derecognized and any gain or loss recognized in depreciation.

Depreciation is calculated using the straight-line method and is applied over the estimated useful lives of the assets, as shown below. The estimated useful life and the depreciation method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

• Buildings 25 to 65 years
• Computer equipment 3 to 7 years
• Other equipment 5 to 15 years

Leasehold improvements (included in Other equipment) are depreciated over the lesser of the useful life or the term of the lease.

Carrying value of property and equipment

	Land and buildings	Computer equipment	Other equipment	Total
2014 Cost
Balances, 31 December 2013	221.4	35.8	80.5	337.7
Additions	70.1	3.4	3.3	76.8
Disposals	-	-	(4.6)	(4.6)
Transfers to other asset categories	-	0.1	(0.1)	-
Balances, 31 December 2014	291.5	39.3	79.1	409.9
Depreciation
Balances, 31 December 2013	(72.4)	(11.4)	(21.5)	(105.3)
Depreciation expense	(5.9)	(5.3)	(14.0)	(25.2)
Disposals	-	-	4.5	4.5
Transfers to other asset categories	-	-	-	-
Balances, 31 December 2014	(78.3)	(16.7)	(31.0)	(126.0)
Carrying amounts
At 31 December 2013	149.0	24.4	59.0	232.4
At 31 December 2014	213.2	22.6	48.1	283.9

Land and buildings includes the activities related to the Head Office Renewal Program. In December 2013, the Bank signed a memorandum of understanding with the construction manager that establishes a guaranteed maximum price for future construction at the head office facility. The commitments at 31 December 2014 are primarily associated with the Head Office Renewal Program.

Other equipment includes bank note inspection equipment that was obtained through a finance lease arrangement (note 17).

	Land and buildings	Computer equipment	Other equipment	Total
Projects in progress 2014
Included in Carrying amounts at 31 December 2014	89.4	5.1	0.4	94.9
Additions during 2014	69.7	3.4	0.3	73.4
Commitments at 31 December 2014	199.5	0.3	1.0	200.8

Projects in progress consists primarily of $89.4 million related to the Head Office Renewal Program (31 December 2013— $19.7 million) and $5.1 million related to the High Availability Renewal Program (31 December 2013—$1.8 million). The Tri-Agency Database System Renewal was put into service in 2014 and removed from Projects in progress.

	Land and buildings	Computer equipment	Other equipment	Total
2013 Cost
Balances, 31 December 2012	240.7	27.2	95.7	363.6
Additions	20.8	7.4	50.6	78.8
Disposals	(37.8)	(1.1)	(65.8)	(104.7)
Transfers to other asset categories	(2.3)	2.3	-	-
Balances, 31 December 2013	221.4	35.8	80.5	337.7
Depreciation
Balances, 31 December 2012	(89.4)	(7.1)	(76.7)	(173.2)
Depreciation expense	(13.8)	(4.9)	(9.8)	(28.5)
Disposals	30.8	0.6	65.0	96.4
Transfers to other asset categories	-	-	-	-
Balances, 31 December 2013	(72.4)	(11.4)	(21.5)	(105.3)
Carrying amounts
At 31 December 2012	151.3	20.1	19.0	190.4
At 31 December 2013	149.0	24.4	59.0	232.4
Projects in progress 2013
Included in Carrying amounts at 31 December 2013	19.7	2.0	0.1	21.8
Additions during 2013	17.8	1.8	0.4	20.0
Commitments at 31 December 2013	41.4	0.1	5.7	47.2

10. Intangible assets

Accounting policy

Intangible assets are identifiable non-monetary assets without physical substance. The Bank's intangible assets consist of computer software internally developed or externally acquired.

Costs that are directly associated with the internal development of identifiable software are recognized as intangible assets if, in management's best estimate, the asset can technically be completed and will provide a future economic benefit to the Bank. Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates.

Computer software assets that are acquired by the Bank and have finite useful lives are measured at cost less accumulated amortization and accumulated impairment losses.

Amortization is calculated using the straight-line method and is applied over the estimated useful lives of the assets, which may vary from 3 to 15 years. The estimated useful life and amortization method are reviewed at the end of each annual reporting period, with the effect of any changes in the estimate being accounted for on a prospective basis.

Carrying value of intangible assets

	Internally generated software	Other software	Total
2014 Cost
Balances, 31 December 2013	43.2	61.4	104.6
Additions	2.7	1.2	3.9
Disposals	-	-	-
Balances, 31 December 2014	45.9	62.6	108.5
Amortization
Balances, 31 December 2013	(33.8)	(18.6)	(52.4)
Amortization expense	(4.7)	(7.6)	(12.3)
Disposals	-	-	-
Balances, 31 December 2014	(38.5)	(26.2)	(64.7)
Carrying amounts
At 31 December 2013	9.4	42.8	52.2
At 31 December 2014	7.4	36.4	43.8
Projects in progress 2014
Included in Carrying amounts at 31 December 2014	2.7	0.5	3.2
Additions during 2014	2.7	0.5	3.2
Commitments at 31 December 2014	-	-	-
2013 Cost
Balances, 31 December 2012	42.8	55.8	98.6
Additions	0.4	5.6	6.0
Disposals	-	-	-
Balances, 31 December 2013	43.2	61.4	104.6
Amortization
Balances, 31 December 2012	(29.7)	(13.3)	(43.0)
Amortization expense	(4.1)	(5.3)	(9.4)
Disposals	-	-	-
Balances, 31 December 2013	(33.8)	(18.6)	(52.4)
Carrying amounts
At 31 December 2012	13.1	42.5	55.6
At 31 December 2013	9.4	42.8	52.2
Projects in progress 2013
Included in Carrying amounts at 31 December 2013	-	4.1	4.1
Additions during 2013	-	2.7	2.7
Commitments at 31 December 2013	-	-	-

11. Other assets

Accounting policy

Bank note inventory consists of production materials, including the polymer substrate and ink, and is measured at the lower of: the cost or the net realizable value. The cost to produce finished bank notes is expensed as incurred.

Composition of other assets

	31 December 2014	31 December 2013
Bank note inventory	17.2	11.9
Net defined-benefit asset (note 15)	134.8	197.7
All other assets	29.2	14.5
Total other assets	181.2	224.1

Included in All other assets is a $15.0 million advance to CBRE Limited in connection with the Head Office Renewal Program, which is expected to remain in place through to the end of the construction period ($Nil at 31 December 2013). The advance is to facilitate the timely payment of subcontractor agreements.

12. Bank notes in circulation

In accordance with the Bank of Canada Act, the Bank has the sole authority to issue bank notes for circulation in Canada. A breakdown by denomination is presented below.

	31 December 2014	31 December 2013
$5	1,188.0	1,103.4
$10	1,275.6	1,263.8
$20	17,801.4	17,229.7
$50	11,233.9	10,744.3
$100	37,323.9	35,039.3
Other bank notes	1,200.7	1,235.4
Bank notes in circulation	70,023.5	66,615.9

Other bank notes include denominations that are no longer issued but continue to be legal tender. Bank notes in circulation are non-interest-bearing liabilities and are due on demand.

13. Deposits

The liabilities within Deposits consist of $23,195.6 million in Canadian-dollar demand deposits ($23,823.5 million at 31 December 2013). The Bank pays interest on the deposits for the Government of Canada, banks and other financial institutions at short-term market rates, and interest expense on deposits is included in the Statement of Net Income and Comprehensive Income.

Deposits from the Government of Canada consist of $1,526.6 million for operational balances and $20,000.0 million held for the prudential liquidity-management plan ($2,329.9 million and $20,000.0 million, respectively, at 31 December 2013).

14. Other liabilities

Accounting policy

A provision is recognized if, as a result of a past event, the Bank has a present legal or constructive obligation that can be estimated reliably as at the statement of financial position date, and it is probable that an outflow of economic benefits will be required to settle the obligation.

Composition of other liabilities

	31 December 2014	31 December 2013
Accrued transfer payment to the Receiver General for Canada	150.4	153.7
Net defined-benefit liability (note 15)
Pension benefit plan	32.0	16.8
Other benefit plans	172.8	159.9
All other liabilities and provisions (note 17)	88.5	100.7
Total other liabilities	443.7	431.1

Accrued transfer payment

The accrued transfer payment to the Receiver General for Canada of $150.4 million (31 December 2013—$153.7 million) is included in the $1,025.4 million Transfer to the Receiver General for the year presented in the Statement of Changes in Equity (31 December 2013—$1,230.7 million).

For the year ended 31 December 2014, an amount of $153.7 million related to 2013 net income and $875.0 million related to 2014 net income was paid to the Receiver General for Canada ($82.2 million related to 2012 net income and $1,077.0 million related to 2013 net income was paid in 2013).

All other liabilities and provisions

As a result of the program to overhaul and modernize the head office building, provisions totalling $15.1 million for the final year of the five-year lease agreement for temporary office space and for site restoration costs were recognized in 2012 and are included under Other liabilities. Other liabilities consists of provisions, a finance lease obligation, accounts payable and accrued liabilities.

15. Employee benefits

Accounting policy

Short-term employee benefits

Short-term employee benefits include cash salary, bonus, annual leave, health benefits, dental care and statutory benefits and are measured on an undiscounted basis.

Long-term employee benefits

The Bank sponsors a long-term disability program.

The liability recognized in respect of this plan amounts to the present value of the defined-benefit obligation. The present value of the defined-benefit obligation is calculated by discounting estimated future cash flows using interest rates on high-quality corporate bonds with terms to maturity approximating the estimated duration of the obligation. The expense recognized for the period-end consists of current service costs, interest costs, remeasurement gains and losses, and past service costs.

The current service costs and the benefit obligations of the plan are actuarially determined on an event-driven accounting basis. Remeasurement gains and losses, as well as past service costs arising from plan amendments, are recognized immediately on the Statement of Net Income and Comprehensive Income in the period in which they occur.

Post-employment defined-benefit plans

The Bank sponsors a funded defined-benefit pension plan (the Bank of Canada Pension Plan) and a funded defined-benefit supplementary pension arrangement (the Bank of Canada Supplementary Pension Arrangement), which are designed to provide retirement income benefits to eligible employees. The Bank of Canada Pension Plan was established under the provisions of the Bank of Canada Act, 1934, and has remained in accordance with the Act as subsequently amended. The Bank of Canada Pension Plan is a registered plan as defined in the Income Tax Act (Canada) [ITA] and, consequently, is not subject to income taxes. The Supplementary Pension Arrangement was created to pay pension benefits to Bank employees with annual earnings above the amount covered by the Bank of Canada Pension Plan (the RPP), as provided under the ITA. The Supplementary Pension Arrangement is a Retirement Compensation Arrangement as defined in the ITA.

Benefits provided under these plans are calculated based on years of service and average full-time salary for the best five consecutive years and are indexed to reflect changes in the consumer price index on the date payments begin and each 1 January thereafter. The Bank is the administrator of the pension plans. The Bank's Board of Directors has established a Pension Committee and has delegated to it the responsibility for carrying out the Bank's duties as administrator of the plans, including adherence to the guidelines established in the Statement of Investment Policy and Procedures (SIPP), which is approved annually by the Board. A separate trust fund has been established for each plan to receive and invest contributions and pay benefits due under the plans.

The most recent actuarial valuation for funding purposes of the Pension Plan was done as of 1 January 2014, and the next required valuation will be as of 1 January 2015.

The Bank also sponsors other unfunded post-employment defined-benefit plans, which include life insurance and eligible health and dental benefits, as well as a long-service benefit program for employees hired before 1 January 2003.

The net asset or liability of these plans is recognized on the Statement of Financial Position. The net asset or liability recognized at period-end in respect of these plans is composed of the present value of the defined-benefit obligation less the fair value of plan assets, where applicable. The present value of the defined-benefit obligation is calculated by discounting estimated future cash flows using interest rates on high-quality corporate bonds with terms to maturity approximating the estimated duration of the obligation. The expense recognized for the reporting period consists of current service costs, past service costs, net interest on the net defined-benefit liability/asset, gains or losses arising on settlement (if applicable) and administrative costs. Net interest is calculated by applying the discount rate to the net defined-benefit liability/asset.

The current service costs and the benefit obligations of the plans are actuarially determined using the projected unit credit method. Remeasurements comprise actuarial gains and losses, the return on plan assets, and the effect of the asset ceiling (if applicable). They exclude amounts included in net interest on the net defined-benefit liability/asset. Remeasurements are recognized immediately in Other Comprehensive Income in the period in which they occur. Past service costs are recognized at the earlier of: when the plan amendment or curtailment occurs, or when the entity recognizes related restructuring costs or termination benefits. Plan assets of funded benefit plans are determined according to their fair value at the end of the reporting period.

Termination benefits

A liability for termination benefits is recognized at the earlier of when the entity can no longer withdraw the offer of the termination benefit or when the entity recognizes any related restructuring costs.

Net defined benefits

The changes in plan assets and defined-benefit obligations for the year are as follows:

	Pension benefit plans		Other benefit plans
	31 December 2014	31 December 2013	31 December 2014	31 December 2013
Fair value of plan assets
Fair value of plan assets at beginning of year	1,404.9	1,266.5	-	-
Interest income	68.6	50.7	-	-
Remeasurement gains
Return on plan assets (see reference 5)	105.0	84.3	-	-
Bank contributions	28.3	41.3	-	-
Employee contributions	11.8	10.2	-	-
Benefit payments and transfers	(47.7)	(46.6)	-	-
Administration costs	(1.7)	(1.5)	-	-
Fair value of plan assets at end of year	1,569.2	1,404.9	-	-
Defined-benefit obligation
Benefit obligation at beginning of year	1,224.0	1,285.8	159.9	182.7
Current service cost	25.9	33.2	6.0	7.5
Interest cost	60.1	52.7	7.7	7.2
Employee contributions	11.8	10.2	-	-
Remeasurement (gains)/losses
Arising from changes in demographic experience	(3.3)	66.1	(3.1)	6.6
Arising from changes in financial assumptions	195.6	(179.0)	12.9	(34.9)
Past service costs	-	1.6	-	-
Benefit payments and transfers	(47.7)	(46.6)	(10.6)	(9.2)
Defined-benefit obligation at end of year	1,466.4	1,224.0	172.8	159.9
Net definedbenefit asset/(liability)	102.8	180.9	(172.8)	(159.9)
Net definedbenefit asset	134.8	197.7	-	-
Net definedbenefit liability	(32.0)	(16.8)	(172.8)	(159.9)
Net definedbenefit asset/(liability)	102.8	180.9	(172.8)	(159.9)

Reference 5
The return on plan assets excludes net interest.

Pension benefit plans — Asset mix

The Plan's SIPP requires that its investments be held in a diversified mix of asset types and also sets out requirements for investment eligibility. The diversification of assets serves to decrease the variations in the expected return performance of the portfolio. The current practice is to conduct an Asset-Liability Modelling (ALM) study every three years. The ALM assists the Pension Committee in establishing an asset allocation that is consistent with the pension plan's objectives and the Bank's risk tolerance.

The Plan's investments are subject to credit, liquidity and market risks. Of these risks, the most significant is asset volatility, since plan liabilities are calculated using a discount rate set with reference to the yield on Canadian AA-corporate bonds. If plan assets underperform this yield, a deficit will be created. Requirements for asset diversification and investment eligibility serve as basic risk-management tools for the investment portfolio as a whole.

The pension benefit plan assets consist of the following:

	31 December 2014				31 December 2013
	Quoted	Unquoted	Total	In %	Quoted	Unquoted	Total	In %
Money market instruments	13.7	-	13.7	0.9	11.2	-	11.2	0.8
Equity instruments
Canadian equity funds	324.7	-	324.7	20.7	310.0	-	310.0	22.1
Foreign equity funds	576.8	-	576.8	36.7	517.4	-	517.4	36.8
Debt instruments (see reference 6)
Securities issued or guaranteed by the Government of Canada	209.0	-	209.0	13.3	171.3	-	171.3	12.2
Other securities	343.2	-	343.2	21.9	295.0	-	295.0	21.0
Real estate funds	-	70.0	70.0	4.5	-	69.1	69.1	4.9
Statutory deposit	-	31.8	31.8	2.0	-	30.9	30.9	2.2
	1,467.4	101.8	1,569.2	100.0	1,304.9	100.0	1,404.9	100.0

Reference 6
Debt instruments consist of fixed-income securities and inflation-linked assets.

Defined-benefit obligations and expenses

The defined-benefit obligation, presented in terms of membership, is as follows:

	Pension benefit plans		Other benefit plans
	31 December 2014	31 December 2013	31 December 2014	31 December 2013
Active members	591.3	476.5	88.7	89.4
Pensioners	788.3	675.7	84.1	70.5
Deferred members	86.8	71.8	-	-
Defined-benefit obligation	1,466.4	1,224.0	172.8	159.9

Benefit plan expenses recognized in the Statement of Net Income and Comprehensive Income are composed of the following components:

	Pension benefit plans		Other benefit plans
	31 December 2014	31 December 2013	31 December 2014	31 December 2013
Current service cost, net of employee contributions	25.9	33.2	6.0	7.5
Past service costs	-	1.6	-	-
Net interest expense	(8.5)	2.0	7.7	7.2
Actuarial gains arising from changes in financial assumptions	-	-	(4.3)	(0.8)
Administration costs	1.7	1.5	-	-
Benefit plan expense recognized in Net Income	19.1	38.3	9.4	13.9
Remeasurement on the net defined-benefit liability/asset:
Return on plan assets (excluding net interest)	(105.0)	(84.3)	-	-
Actuarial (gains)/losses arising from changes in demographic experience	(3.3)	66.1	1.2	6.6
Actuarial (gains)/losses arising from changes in financial assumptions	195.6	(179.0)	12.9	(34.1)
Remeasurement (gains)/losses recognized in Other Comprehensive Income	87.3	(197.2)	14.1	(27.5)

Remeasurement gains and losses pertaining to post-employment benefit plans are recognized in Other Comprehensive Income and are accumulated in Equity in the Remeasurements reserve.

The cumulative remeasurement losses recognized in Other Comprehensive Income are as follows:

	Pension benefit plans		Other benefit plans
	31 December 2014	31 December 2013	31 December 2014	31 December 2013
Cumulative remeasurement losses recognized, beginning of year	(133.4)	(330.6)	(12.0)	(39.5)
Remeasurement gains/(losses) recognized in current year	(87.3)	197.2	(14.1)	27.5
Cumulative remeasurement losses recognized, end of year	(220.7)	(133.4)	(26.1)	(12.0)

Total cash payments

Regulations governing federally regulated pension plans establish certain solvency requirements that assume that the plans are wound up at the valuation date. Actuarial valuations for funding purposes are required annually under the Pension Benefits Standards Act. The actuarial valuation of the Pension Plan completed at 1 January 2014 reported a solvency surplus of $48.7 million and a three-year average solvency deficit of $24.4 million. The Bank is making additional contributions to fund this average solvency deficit over a period of five years. In 2014, these additional contributions amounted to $4.9 million.

Contributions in 2015 will be based on the actuarial valuation as at 1 January 2015, and are estimated to be $22.0 million, consisting solely of regular contributions to cover current service costs. In 2015, it is estimated that there will be no requirement for additional contributions as projections indicate an average three-year solvency surplus.

Assumptions

The cost of the defined-benefit pension plans and other benefits plans and the present value of the benefit obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actuarial developments in the future. These assumptions include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Owing to the complexities involved in the valuation and its long-term nature, a defined-benefit obligation is highly sensitive to changes in these assumptions.

The most recent actuarial valuation for funding purposes of the Pension Plan was done as of 1 January 2014, and the next required valuation will be as of 1 January 2015.

The significant assumptions used are as follows (on a weighted-average basis):

	Pension benefit plans		Other benefit plans
	31 December 2014	31 December 2013	31 December 2014	31 December 2013
Defined-benefit obligation
Discount rate	4.00%	4.90%	3.99%	4.79%
Inflation rate (see reference 7)	2.00%	2.00%	n.a.	n.a.
Rate of compensation increase	3.20%	3.30%	3.20%	3.30%
	+ merit	+ merit	+ merit	+ merit
Benefit plan expense
Discount rate	4.90%	4.00%	4.79%	3.86%
Inflation rate (see reference 8)	2.00%	2.00%	n.a.	n.a.
Rate of compensation increase	3.20%	3.30%	3.30%	3.30%
	+ merit	+ merit	+ merit	+ merit
Assumed medical cost trend
Medical cost trend rate	n.a.	n.a.	6.01% - 4.50%	6.31% - 4.50%
Year that the rate reaches the ultimate trend rate	n.a.	n.a.	2029	2029

• Reference 7
  Other benefit plans does not include an inflation rate adjustment since it is a component of Assumed medical cost trend.
• Reference 8
  Other benefit plans does not include an inflation rate adjustment since it is a component of Assumed medical cost trend.

The parameter most subject to change is the discount rate, which is determined by reference to Canadian AA-corporate bonds with terms to maturity approximating the duration of the obligation.

The weighted-average duration of the defined-benefit obligation is approximately 17 years for the Pension benefit plans and 6 to 21 years for the Other benefit plans.

The mortality assumptions used in the plan valuations are based on tables issued by the Canadian Institute of Actuaries. Actuarial adjustments to the tables are applied when recommended by the plan's actuaries. In 2014, the assumption for life expectancy for the plan valuations assumes that a male member reaching 60 will live for approximately 27 years (2013: 27 years) and a female member approximately 29 years (2013: 29 years).

Sensitivity analysis

The following table outlines the potential impact of changes in certain key assumptions used in measuring the defined-benefit obligations and benefit costs.

	Change in obligation
	Pension benefit plans	Other benefit plans
Discount rate	4.00%	3.99%
Impact of 0.10 percentage point increase	(23.7)	(3.0)
Impact of 0.10 percentage point decrease	24.2	3.1
Rate of compensation increase	3.20%	3.30%
Impact of 0.10 percentage point increase	3.8	0.4
Impact of 0.10 percentage point decrease	(3.7)	(0.4)
Mortality rate
Impact of 0.10 percentage point increase	(28.8)	(3.0)
Impact of 0.10 percentage point decrease	31.9	3.5
Inflation rate	2.00%	n.a.
Impact of 0.10 percentage point increase	21.9	n.a.
Impact of 0.10 percentage point decrease	(21.3)	n.a.
Medical cost trend rates	n.a.	6.01%
Impact of 1.00 percentage point increase	n.a.	29.0
Impact of 1.00 percentage point decrease	n.a.	(22.4)

The sensitivity analysis presented in this table is hypothetical and should be used with caution. The analysis is based on a change in assumptions while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. The method and types of assumptions used in preparing the sensitivity analysis did not change compared with the previous year.

16. Equity

The Bank manages its capital to ensure compliance with the Bank of Canada Act. There were no other externally imposed capital requirements at the end of the reporting year.

The elements of equity are shown in the table below:

	31 December 2014	31 December 2013
Share capital	5.0	5.0
Statutory reserve	25.0	25.0
Special reserve	100.0	100.0
Available-for-sale reserve	319.3	305.2
Retained earnings	-	-
Total equity	449.3	435.2

Share capital

The authorized capital of the Bank is $5.0 million divided into 100 000 shares with a par value of $50 each. The shares are fully paid and have been issued to the Minister of Finance, who holds them on behalf of the Government of Canada.

Statutory reserve

The statutory reserve was accumulated out of net income until it reached the stipulated maximum amount of $25.0 million in 1955.

Special reserve

The special reserve was created in 2007 further to an amendment to the Bank of Canada Act to offset potential unrealized valuation losses due to changes in the fair value of the Bank's available-for-sale portfolio. The amount held in the special reserve is reviewed regularly for appropriateness using value-at-risk analysis and scenario-based stress tests and may be amended, pursuant to a resolution passed by the Board of Directors. The value-at-risk analysis uses historical data to estimate the maximum possible extent of unrealized valuation losses of the Bank's treasury bill portfolio. The scenario-based stress tests assess the impact of a rapid increase in interest rates on the value of the Bank's treasury bill portfolio. This reserve is subject to a ceiling of $400 million; an initial amount of $100 million was established in September 2007.

Available-for-sale reserve

The available-for-sale reserve represents cumulative movements in the fair value of the Bank's available-for-sale portfolios, as shown below:

	31 December 2014	31 December 2013
Government of Canada treasury bills	2.2	6.2
BIS shares	317.1	299.0
Available-for-sale reserve	319.3	305.2

Retained earnings

The net income of the Bank, less any allocation to reserves, is considered to be ascertained surplus and is transferred to the Receiver General for Canada, consistent with the requirement of section 27 of the Bank of Canada Act.

The Bank's remittance agreement with the Minister of Finance was designed to enable the Bank to manage its equity requirements considering the volatility arising from fair-value changes and remeasurements (which are recorded in Other Comprehensive Income). This agreement allows the Bank to deduct from its remittances to the Receiver General and hold within Retained earnings an amount equal to unrealized losses on AFS financial assets, unrealized remeasurements of the net defined-benefit liability/asset on defined-benefit plans and other unrealized or non-cash losses arising as a result of changes in accounting standards or legislation.

During 2014, the Bank withheld $101.4 million for remittances ($224.7 million paid during 2013) and, as at 31 December 2014, $127.0 million ($25.5 million as at 31 December 2013) in withheld remittances was outstanding.

17. Leases

Accounting policy

Where the Bank is a lessee

Leases of equipment where the Bank has substantially assumed all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the lease's inception at the lower of the fair value of the leased asset or the present value of the minimum lease payments. The corresponding lease obligations, net of finance charges, are included in Other liabilities. Each lease payment is allocated between the liability and finance charges to achieve a constant rate of return on the finance lease obligation outstanding. Equipment acquired under finance leases is depreciated over the shorter of the asset's useful life or the lease term.

Other leases are classified as operating leases. Payments made under operating leases are charged to the Statement of Net Income and Comprehensive Income on a straight-line basis over the period of the lease.

Where the Bank is a lessor

Leases granted on the Bank's property were assessed and classified as operating leases, because the risks and rewards of ownership are not transferred to the lessees. Operating lease income is recognized on a straight-line basis over the period of the lease.

Operating lease commitments

The Bank occupies leased premises in Ottawa, Halifax, Montréal, Toronto, Calgary and Vancouver. The minimum payments are determined at the beginning of the lease and may vary during the term of the lease. Contingent rent on premises leases is based on building operating costs; for office equipment leases, contingent rent is based on usage. The expiry dates vary for each lease, from August 2014 to October 2025.

As a result of the program to overhaul and modernize the head office building, in 2012, the Bank signed a five-year lease agreement for temporary office space.

At 31 December 2014, the future minimum payments are $58.7 million for rent, real estate taxes and building operations. Lease payments expensed in the period are $15.8 million ($12.2 million as at 31 December 2013).

	31 December 2014	31 December 2013
Due within one year	16.0	16.0
Due within one to five years	40.5	55.8
Due later than five years	2.2	3.3
Total premises lease commitments	58.7	75.1

Finance lease commitments

As at 31 December 2014, the future minimum lease payments were $9.3 million ($12.0 million as at 31 December 2013) for equipment obtained through a finance lease arrangement (note 9). The net carrying amount of the equipment at 31 December 2014 was $8.8 million ($11.3 million at 31 December 2013). The finance lease obligation amounted to $9.0 million at 31 December 2014 ($11.5 million as at 31 December 2013) and is recorded in Other liabilities (note 14).

18. Commitments, contingencies and guarantees

Long-term contracts other than leases

The Bank has a long-term contract with an outside service provider for retail debt services that expires in 2021. At 31 December 2014, fixed payments totalling $132.2 million remained, plus a variable component based on the volume of transactions.

The Bank has a long-term contract with an outside service provider for data centre services that expires in 2025. At 31 December 2014, fixed payments totalling $14.1 million remained.

Commitments related to the program to overhaul and modernize the head office building are included in commitments for Property and equipment in note 9.

The total minimum annual payments for long-term contracts, other than leases, Property and equipment, and Intangible assets, are as follows:

Due within one year	22.1
Due within one to three years	44.2
Due within three to five years	44.2
Thereafter	35.8
Total minimum annual payments	146.3

Foreign currency contracts

The Bank is a counterparty to several foreign currency swap facilities as follows:

	Maximum available
Bilateral liquidity swap facilities with central banks
Bank of Japan (denominated in Japanese yen)	Unlimited
Swiss National Bank (denominated in Swiss francs)	Unlimited
Bank of England (denominated in British pounds)	Unlimited
European Central Bank (denominated in euros)	Unlimited
Federal Reserve Bank of New York (denominated in U.S. dollars)	Unlimited
People's Bank of China (denominated in renminbi)	200,000.0
Other swap facilities
Exchange Fund Account of Canada (denominated in Canadian dollars)	Unlimited
Federal Reserve Bank of New York (denominated in U.S. dollars)	2,000.0
Banco de México (denominated in Canadian dollars)	1,000.0

None of the liquidity or other swaps were accessed, by either party, in 2014 or 2013. No related commitments existed at 31 December 2014 ($Nil as at 31 December 2013).

Bilateral liquidity swap facilities with central banks

The bilateral liquidity swap facilities were established to provide liquidity in each jurisdiction in any of their currencies, should market conditions warrant.

The swap facilities with the Bank of Japan, the Swiss National Bank, the Bank of England, the European Central Bank and the Federal Reserve Bank of New York were converted to standing arrangements in January 2014. The Bank of Canada and the People's Bank of China signed a reciprocal three-year Canadian- dollar/renminbi bilateral swap arrangement in November 2014.

These facilities can be structured as either a Canadian-dollar liquidity swap or a foreign currency liquidity swap arrangement and can be initiated by either party. The exchange rate applicable to the swap facilities is based on the prevailing market spot exchange rate as mutually agreed upon by the parties.

Other swap facilities

The other swap facilities established with the Federal Reserve Bank of New York and with the Banco de México, which expire on 11 December 2015, have indefinite terms and are subject to annual renewal.

The Bank is also party to a standing foreign currency swap facility with the Exchange Fund Account of Canada. There is no stated maximum amount under this agreement.

Contingency

The 9 441 shares in the BIS have a nominal value of 5 000 Special Drawing Rights per share, of which 25 per cent (i.e. SDR1,250) is paid up. The balance of SDR3,750 is callable at three months' notice by a decision of the BIS Board of Directors. The Canadian equivalent of this contingent liability was $59.5 million at 31 December 2014 ($58.0 million at 31 December 2013), based on prevailing exchange rates.

Guarantees

In the normal course of operations, the Bank enters into certain guarantees, which are described below.

LVTS guarantee

The LVTS is a large-value payment system, owned and operated by the CPA. Any deposit-taking financial institution that is a member of the CPA can participate in the LVTS, provided that it maintains a settlement account at the Bank of Canada, has the facilities to pledge collateral for LVTS purposes and meets certain technical requirements. The system's risk-control features, which include caps on net debit positions and collateral to secure the use of overdraft credit, are sufficient to permit the system to obtain the necessary liquidity to settle in the event of the failure of the single LVTS participant with the largest possible net amount owing. The Bank guarantees to provide this liquidity, and, in the event of a single-participant failure, the liquidity loan will be fully collateralized. In the extremely unlikely event that there were defaults by more than one participant during the LVTS operating day, in an aggregate amount in excess of the largest possible net amount owing by a single participant, there would not likely be enough collateral to secure the amount of liquidity that the Bank would need to provide to settle the system. This might result in the Bank having unsecured claims on the defaulting participants in excess of the amount of collateral pledged to the Bank to cover the liquidity loans. The Bank would have the right, as an unsecured creditor, to recover any amount of its liquidity loan that was unpaid. The amount potentially at risk under this guarantee is not determinable, since the guarantee would be called upon only if a series of extremely low-probability events were to occur. No amount has ever been provided for in the liabilities of the Bank, and no amount has ever been paid under this guarantee.

Other indemnification agreements

In the normal course of operations, the Bank provides indemnification agreements with various counterparties in transactions such as service agreements, software licences, leases and purchases of goods. Under these agreements, the Bank agrees to indemnify the counterparty against loss or liability arising from acts or omissions of the Bank in relation to the agreement. The nature of the indemnification agreements prevents the Bank from making a reasonable estimate of the maximum potential amount that the Bank would be required to pay such counterparties. No amount has ever been paid under such indemnifications.

Insurance

The Bank does not normally insure against direct risks of loss to the Bank, except for potential liabilities to third parties and where there are legal or contractual obligations to carry insurance. However, in connection with the Head Office Renewal Program, the Bank has obtained insurance coverage for the period of construction to cover direct risks to the Bank's property.

Any costs arising from risks not insured are recognized in the accounts if, as a result of a past event, the Bank has a present legal or constructive obligation that can be estimated reliably as at the statement of financial position date, and it is probable that an outflow of economic benefits will be required to settle the obligation.

19. Related parties

The Bank is related in terms of common ownership to all Government of Canada departments, agencies and Crown corporations. To achieve its monetary policy objectives, the Bank maintains a position of structural and functional independence from the Government of Canada through its ability to fund its own operations without external assistance and through its management and governance.

In the normal course of its operations, the Bank enters into transactions with related parties, and material transactions and balances are presented in these financial statements. Not all transactions between the Bank and government-related entities have been disclosed, as permitted by the partial exemption available to wholly owned government entities in International Accounting Standard 24 Related Party Disclosures (IAS 24).

The Bank provides funds-management, fiscal-agent and banking services to the Government of Canada, as mandated by the Bank of Canada Act, and does not recover the costs of these services.

Bank of Canada pension plans

The Bank provides management, investment and administrative support to the Bank of Canada Pension Plan. Services in the amount of $0.8 million ($0.6 million in 2013) were fully recovered from the Plan in 2014.

Key management personnel and compensation

The key management personnel responsible for planning, directing and controlling the activities of the Bank are the members of the Executive Council, the Senior Management Council and the Board of Directors. The number of key management personnel as at 31 December 2014 was 29 (21 in 2013).

The compensation of key management personnel is presented in the following table:

	31 December 2014	31 December 2013
Short-term employee benefits	3.7	3.0
Post-employment benefits	1.0	0.9
Directors' fees	0.2	0.3
Total compensation	4.9	4.2

Short-term employee benefits and post-employment benefits apply to Bank of Canada employees only.

There were no other long-term employee benefit costs or termination benefits related to key management personnel in 2014.

[19-1-o]

DEPARTMENT OF HEALTH

CANADIAN ENVIRONMENTAL PROTECTION ACT, 1999

Notice with respect to the Proposed Code of Practice for a Recommended Concentration of 2-(2-Methoxyethoxy) Ethanol (DEGME) in Surface Coating Materials Available to Consumers in Canada

Pursuant to subsection 55(3) of the Canadian Environmental Protection Act, 1999, the Minister of Health hereby gives notice of the availability of the following proposed code of practice to be issued under subsection 55(1) of that Act:

Proposed Code of Practice for a Recommended Concentration of 2-(2-Methoxyethoxy) Ethanol (DEGME) in Surface Coating Materials Available to Consumers in Canada

Electronic copies of this proposed code of practice may be downloaded from the Internet at the following address: http://www.hc-sc.gc.ca/ewh-semt/consult/_2015/degme-emdeg/degme-emdeg-eng.php.

April 25, 2015

AMANDA JANE PREECE
Director General
Safe Environments Directorate

On behalf of the Minister of Health

Proposed Code of Practice for a Recommended Concentration of 2-(2-Methoxyethoxy) Ethanol (DEGME) in Surface Coating Materials Available to Consumers in Canada

Glossary of terms

CEPA 1999	Canadian Environmental Protection Act, 1999
Surface coating material	For the purposes of this proposed code of practice (herein referred to as the proposed code), the definition of a surface coating material is the same as in the Surface Coating Materials Regulations under the Canada Consumer Product Safety Act (CCPSA), as amended from time to time: a paint or other similar material that dries to a solid film when a layer of it is applied to a surface. It does not include a material that becomes a part of the substrate.
Consumer product	For the purposes of this proposed code, a consumer product is a product that may reasonably be expected to be obtained by an individual to be used for non-commercial purposes.

1. Purpose of the proposed code of practice

The risk management objective for the proposed code for DEGME is to further protect human health by reducing the concentrations of DEGME in consumer products that are surface coating materials. The proposed code will help in the meeting of this objective by facilitating a reduction in exposure of the general public to DEGME during application of surface coating materials. However, all applicable municipal, provincial, territorial and federal legal requirements pertaining to this substance must still be met, and a commitment by any person to adopt the practices and procedures set out in the proposed code does not remove obligations to comply with all applicable statutory and regulatory requirements. This proposed code outlines the following recommended practice:

The concentration of total DEGME present in a surface coating material available to a consumer in Canada should not be more than 10 000 mg/kg (also expressed as 1.0% w/w).

2. Background

DEGME (Chemical Abstracts Service No. 111-77-3) was assessed as part of Batch 3 of the Challenge to industry under the Chemicals Management Plan. The final Screening Assessment for DEGME can be found on the Chemicals Management Plan Web site (http://www.chemicalsubstanceschimiques.gc.ca/challenge-defi/batch-lot-3/index-eng.php). The report concludes that DEGME is entering the environment in a quantity or concentration or under conditions that constitute or may constitute a danger in Canada to human life or health. The conclusion is based on the potential inadequacy of the margin between exposure and critical effect levels. Specifically, the margin between conservative estimates of dermal exposure to DEGME during use of consumer products and critical effect levels for developmental toxicity in experimental animals was considered inadequate.

The proposed risk management approach document describes the various uses of DEGME and its sources of exposure. The principal source of exposure to DEGME in the general population is expected to be through inhalation and dermal contact during the use of consumer products containing the substance and, in particular, during the use of various surface coating materials in which DEGME is used as a solvent.

3. Exposure mitigation

It is recommended that the concentration of total DEGME present in a surface coating material available to a consumer in Canada not exceed 10 000 mg/kg when a wet sample is tested in accordance with a method that conforms to good laboratory practices (see Appendix 1). [Note: 10 000 mg/kg = 1.0% w/w.]

4. Applicability

This proposed code may be adopted by any person who manufactures in Canada or imports into Canada surface coating materials that are consumer products containing DEGME.

5. Applicable products

This proposed code is applicable to consumer products that are surface coating materials containing DEGME.

6. Products excluded from the proposed code

Surface coating materials for industrial and/or commercial use only are not included in the proposed code.

7. Declaration

Canadian manufacturers and importers of consumer products that are surface coating materials containing DEGME who have adopted the measures in this proposed code are advised to communicate, in writing, with the Minister of Health no later than six months after publication of the proposed code or six months after they start to use DEGME in their products or to import products containing DEGME. The Minister of Health should also be notified in writing when anyone who has adopted the proposed code permanently ceases to manufacture or import applicable products containing DEGME.

Please see Appendix 2 for a declaration form that can be submitted to the Minister of Health.

8. Contact information to submit declarations

Declarations should be submitted to the Minister of Health either by email, mail or fax to the following addresses. Please type “Declaration for Code of Practice for DEGME” in the subject line of your message.

Email: chemicalsubstanceschimiques@hc-sc.gc.ca

• Mail: Chemical Substances Web site
• c/o Health Canada
• 269 Laurier Avenue West, Address Locator 4905B
• Ottawa, Ontario
• K1A 0K9
• Fax: 613-952-8857

9. Confidentiality

In this section, “confidential business information” in respect of a person to whose business or affairs the information relates refers to business information

• that is not publicly available;
• in respect of which the person has taken measures that are reasonable in the circumstances to ensure that it remains not publicly available; and
• that has actual or potential economic value to the person or their competitors because it is not publicly available and its disclosure would result in a material financial loss to the person or a material financial gain to their competitors.

A person who provides information to the Minister of Health under this proposed code may submit a written request that the information or part of it be treated as confidential business information. If the Minister considers that the information does not meet the definition of confidential business information, a written notice will be given to this effect to the person who provided the information to the Minister.

The Minister of Health will use and disclose confidential business information in respect of which a request for confidentiality has been made as permitted by law. For greater certainty, personal information as defined in section 3 of the Privacy Act will be used and disclosed in accordance with that Act.

10. Verification and reporting

The Minister of Health will evaluate the effectiveness of the proposed code. To that end, baseline data on concentrations of DEGME in consumer products that are surface coating materials have been collected in 2014. Approximately two years after the publication of the final code, information on the concentrations of DEGME in consumer products that are surface coating materials will again be requested. Future information requests, whether mandatory or voluntary, may also be made to determine whether the code of practice is effective or whether additional risk management is required.

11. Coming into effect

The proposed code will come into effect on the day of its final publication in the Canada Gazette, Part I.

Appendix 1

Definition of Good Laboratory Practices

The Principles of Good Laboratory Practice (GLP) have been developed to promote the quality and validity of test data used for determining the safety of chemicals and chemical products. It is a managerial concept (i.e. quality management system) covering the organizational process and the conditions under which laboratory studies are planned, performed, monitored, recorded and reported. The principles of GLP are required to be followed by test facilities carrying out studies to be submitted to national authorities for the purposes of assessment of chemicals and other uses relating to the protection of man and the environment. (From: Good Laboratory Practice — OECD Principles and Guidance for Compliance Monitoring, 2005. Available online at http://browse.oecdbookshop.org/oecd/pdfs/product/9705101e.pdf.)

Appendix 2

Example Declaration Form

1. Contact information
   • (a) Name and civic address of the person providing information or duly authorized representative:
     • Name of contact:
     • Name of company/corporation:
     • Civic and postal address:
     • Email address:
     • Telephone number:
     • Fax number:
   • (b) General/technical contact for the company/facility (if different from authorized representative). This contact information will be used by Health Canada to correspond with your company/facility on items related to your submission.
   • Name of contact:
   • Name of company/corporation:
   • Civic and postal address:
   • Email address:
   • Telephone number:
   • Fax number:
2. Declaration
   • I declare that [insert company name] has adopted the Code of Practice for a Recommended Concentration of 2-(2-Methoxyethoxy) Ethanol (DEGME) in Surface Coating Materials Available to Consumers in Canada.
   • Signature:
   • Date:

[19-1-o]

DEPARTMENT OF INDUSTRY

OFFICE OF THE REGISTRAR GENERAL

Appointments

Name and position	Order in Council
Côté, The Hon. Jean E.	2015-439
Government of Alberta
Administrator
April 12 to April 17, 2015
Government of Manitoba	2015-440
Administrators
Joyal, The Hon. Glenn D.
April 19 to April 24, 2015
Perlmutter, The Hon. Shane I.
April 14 to April 18, 2015
Government of Ontario	2015-465
Administrators
Feldman, The Hon. Kathryn N.
April 28 to April 30, 2015
Lauwers, The Hon. Peter D.
April 27 and May 1, 2015
McLeese, Robert	2015-464
Export Development Canada
Director of the Board of Directors
Vance, Lieutenant-General	2015-466
Chief of the Defence Staff, at the rank of General

April 30, 2015

DIANE BÉLANGER
Official Documents Registrar

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DEPARTMENT OF INDUSTRY

RADIOCOMMUNICATION ACT

Notice No. SLPB-002-15 — Consultation on a Licensing Framework for Residual Spectrum Licences in the 700 MHz and AWS-3 Bands

The intent of this notice is to announce the release of the document entitled Consultation on a Licensing Framework for Residual Spectrum Licences in the 700 MHz and AWS-3 Bands (hereinafter referred to as the Consultation). This document sets out the Department's proposals with respect to policy, technical and licensing issues concerning spectrum licences that remained unassigned from the previous licensing processes for spectrum in the 700 MHz and AWS-3 bands. Comments are being sought on the proposals outlined in the Consultation as well as on the related Proposed Table of Key Dates.

Submitting comments

To ensure consideration, parties should submit their comments no later than May 25, 2015. Respondents are encouraged to submit their comments in electronic format (Microsoft Word or Adobe PDF) to the following email address: spectrum.auctions@ic.gc.ca. Interested parties will also have the opportunity to reply to comments from other parties. Reply comments will be accepted until June 12, 2015. Soon after the close of each comment period, all comments received will be posted on Industry Canada's Spectrum Management and Telecommunications Web site at www.ic.gc.ca/spectrum.

All submissions should cite the Canada Gazette, Part I, the publication date, the title and the notice reference number (SLPB-002-15).

All comments will be reviewed and considered by Industry Canada in order to arrive at a decision regarding the above-mentioned proposals.

Obtaining copies

Copies of this notice and of documents referred to herein are available electronically on Industry Canada's Spectrum Management and Telecommunications Web site at www.ic.gc.ca/spectrum.

Official versions of Canada Gazette notices can be viewed at www.gazette.gc.ca/rp-pr/p1/index-eng.html.

April 30, 2015

FIONA GILFILLAN
Director General
Spectrum Licensing Policy Branch

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DEPARTMENT OF TRANSPORT

AERONAUTICS ACT

Interim Order No. 3 Respecting Flight Deck Occupants

Whereas the annexed Interim Order No. 3 Respecting Flight Deck Occupants is required to deal with a significant risk to aviation safety and the safety of the public;

And whereas, pursuant to subsection 6.41(1.2) (see footnote a) of the Aeronautics Act (see footnote b), the Minister of Transport has consulted with the persons and organizations that the Minister considers appropriate in the circumstances concerning the annexed Interim Order No. 3 Respecting Flight Deck Occupants;

Therefore, the Minister of Transport, pursuant to subsection 6.41(1) (see footnote c) of the Aeronautics Act (see footnote d), makes the annexed Interim Order No. 3 Respecting Flight Deck Occupants.

Ottawa, April 22, 2015

LISA RAITT
Minister of Transport

INTERIM ORDER NO. 3 RESPECTING FLIGHT DECK OCCUPANTS

INTERIM ORDER

Terminology — Canadian Aviation Regulations

1. Unless the context requires otherwise, words and expressions used in this Interim Order have the same meaning as in subsection 101.01(1) of the Canadian Aviation Regulations.

Application

2. (1) Subject to subsection (2), this Interim Order applies in respect of

• (a) the operation of an aeroplane by an air operator under Subpart 5 of Part VII of the Canadian Aviation Regulations in a passenger-carrying air transport service; and
• (b) the operation in Canadian airspace of a passenger-carrying aeroplane, in respect of which a type certificate has been issued authorizing the transport of 20 or more passengers, by a foreign operator under a Canadian foreign air operator certificate or a flight authorization issued by the Minister under paragraph 701.10(a) of the Canadian Aviation Regulations.
  

Exception

(2) This Interim Order does not apply in respect of an aeroplane that has a Class F cargo compartment located on the main deck between the flight deck and the passenger cabin.

Flight deck occupants — air operators

3. (1) An air operator must ensure that, if a flight crew member leaves the flight deck during flight time, one flight crew member and one other authorized person are present on the flight deck while the flight crew member who left the flight deck is absent.

Authorized persons

(2) For the purposes of subsection (1), an authorized person is

• (a) a flight crew member;
• (b) a crew member;
• (c) a Department of Transport air carrier inspector who presents an official identity card to the pilot-in-command of the aeroplane;
• (d) an employee of the air operator who is not a crew member;
• (e) a pilot, flight engineer or flight attendant employed by a wholly owned subsidiary or a code share partner of the air operator;
• (f) a person who has expertise related to the aeroplane, its equipment or its crew members and who is required to be in the flight deck to provide a service to the air operator; or
• (g) a person who is exempted from the application of subsection 705.27(3) of the Canadian Aviation Regulations by the Minister under subsection 5.9(2) of the Act.

Flight deck occupants — foreign operators

4. (1) A foreign operator must ensure that, if a flight crew member leaves the flight deck during flight time, one flight crew member and one other authorized person are present on the flight deck while the flight crew member who left the flight deck is absent.

Authorized persons

(2) For the purposes of subsection (1), an authorized person is

• (a) a flight crew member;
• (b) a crew member;
• (c) an inspector of the civil aviation authority of the state where the aeroplane is registered;
• (d) a Department of Transport air carrier inspector who presents an official identity card to the pilot-in-command of the aeroplane;
• (e) a person who has expertise related to the aeroplane, its equipment or its crew members and who is required to be in the flight deck to provide a service to the foreign operator; or
• (f) a person who is exempted from the application section 701.28 of the Canadian Aviation Regulations by the Minister under subsection 5.9(2) of the Act.
  

Conflict

5. If there is a conflict between the Canadian Aviation Regulations and this Interim Order, this Interim Order prevails to the extent of the conflict.

REPEAL

6. Interim Order No. 2 Respecting Flight Deck Occupants, made on April 10, 2015, is repealed if this Interim Order is made before Interim Order No. 2 Respecting Flight Deck Occupants ceases to have effect.

EXPLANATORY NOTE

(This note is not part of the Interim Order.)

Proposal

Interim Order No. 3 Respecting Flight Deck Occupants (the “Interim Order”), made under subsection 6.41(1) of the Aeronautics Act by the Minister of Transport, requires that one flight crew member and one other authorized person be on the flight deck during the absence of a flight crew member.

This requirement applies to air operators conducting a passengercarrying air transport service under Subpart 705 — Airline Operations of the Canadian Aviation Regulations (CARs), to foreign operators operating a passenger-carrying aeroplane in respect of which a type certificate has been issued authorizing the transport of 20 or more passengers in Canadian airspace, under a Canadian foreign air operator certificate or a flight authorization issued by the Minister of Transport under paragraph 701.10(a) of the CARs.

The Interim Order, in accordance with subsection 6.41(2) of the Aeronautics Act, ceases to have effect 14 days after it is made unless it is approved by the Governor in Council (GIC). Following GIC approval, the Interim Order, in accordance with subsection 6.41(3) of the Aeronautics Act, will remain in effect for one year or until regulations having the same effect are made.

Objective

The objective of the Interim Order is to ensure that there is always a second person on the flight deck during the absence of a flight crew member.

Background

The preliminary investigation of the crash of the Germanwings Airbus A320 on March 24, 2015, has indicated that one of the flight crew members may have deliberately crashed the aircraft while alone on the flight deck. The other flight crew member had left the flight deck and was unable to regain entry.

The Canadian Aviation Regulations permit flight crew members to leave the flight deck where their absence is necessary for the performance of duties in connection with the operation of the aircraft or is in connection with physiological needs, or if they are taking a rest period and are relieved by other flight crew members. The crash of the Germanwings aircraft showed there is a risk associated with having only one crew member being present on the flight deck.

The Interim Order requires a Canadian air operator or a foreign operator operating in Canadian airspace to ensure that, if a flight crew member leaves the flight deck during flight time, one flight crew member and one other authorized person are present on the flight deck while the flight crew member who left is absent. Subsections 3(2) and 4(2) of the Interim Order list the persons who are authorized to access the flight deck in this situation (e.g. an employee of the air operator, a Department of Transport air carrier inspector, a flight engineer).

The Interim Order does not apply in respect of a Class F cargo compartment aeroplane operated by a Canadian air operator. The combined cargo-passenger configuration of this type of aeroplane would require the air operator to carry a third crew member on the flight deck at all times, as it is not possible for a cabin crew member to go through the Class F cargo compartment in order to reach the flight deck. As these air operators would carry costs not applicable to others (i.e. they would be disproportionately impacted), the Interim Order does not apply to Class F cargo compartment aeroplanes operated by Canadian air operators.

Implications

The Aeronautics Act authorizes the Minister of Transport to make an Interim Order where it is necessary to deal with a significant risk, direct or indirect, to aviation safety or the safety of the public. The current Interim Order mitigates a risk to aviation safety associated with having only one flight crew member on the flight deck.

Most of Canada's major airlines have already put measures in place to have two authorized persons in the flight deck at all times. Requirements for flight deck occupancy have been in place in the United States since 2002. Canadian air operators that operate in the United States are already familiar with the requirement and are prepared to meet it. On March 27, 2015, the European Aviation Safety Agency (EASA) issued a recommendation for airlines to observe the “four-eye rule” in the cockpit, stipulating that in the case of the pilot-in-command or second-in-command leaving the cockpit, a member of the crew should be present in the cockpit with the remaining pilot.

Proposed regulatory amendments to the Canadian Aviation Regulations will be submitted within one year to the GIC for consideration.

Consultation

Transport Canada officials have consulted with the Air Transport Association of Canada and the National Airlines Council of Canada representing Canadian air operators conducting passenger-carrying operations, as well as with major foreign operators.

Departmental contact

Marie-Anne Dromaguet
Chief
Regulatory Affairs
Policy and Regulatory Services
Transport Canada
Email: marie-anne.dromaguet@tc.gc.ca
Telephone: 613-990-1184

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