CITY OF CHILLIWACK 2025 Annual Report 76 77 2025 Annual Report CITY OF CHILLIWACK CITY OF CHILLIWACK NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2025 City of Chilliwack Notes to Consolidated Financial Statements Year Ended December 31, 2025 (f) Revenue recognition: Revenues from municipal taxation, grants in lieu of taxes and utility charges are recognized when the levies are billed or billable to the property owner. Revenue from sales of services is recognized when the services are provided. Development cost charges are recognized as revenue in the period the funds are expended on an eligible development project. Development cost charges collected, but not yet expended, are reported as an unearned revenue. (g) Government transfers: Government transfers received by the City are recognized as revenue once the transfer has been authorized by the transferring government and the City has met any eligibility requirements. In cases where stipulations have been imposed by the transferring government on the City with respect to the use or retention of funds already transferred and those stipulations have not been met, a liability is recognized. Transfers from the City to other agencies are normally granted only in return for services provided to the community. As such, they would be recognized on the same basis as other expenses. (h) Use of estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and reported amounts of revenues and expenses as at the date of the financial statements. Areas that contain estimates include assumptions used in estimating provisions for accrued liabilities, contingent liabilities, estimated useful lives of tangible capital assets and the value of assets contributed to the City. Actual results could differ from these estimates. (i) Contaminated sites: A liability for contaminated sites is recognized when a site is not in productive use and the following criteria are met: (i) An environmental standard exists; (ii) Contamination exceeds the environmental standard; (iii) The City is directly responsible or accepts responsibility; (iv) It is expected that future economic benefits will be given up; and (v) A reasonable estimate of the amount can be made. The liability is recognized as management's estimate of the cost of post-remediation including operation, maintenance and monitoring that are an integral part of the remediation strategy for a contaminated site. (j) Asset Retirement Obligation: An asset retirement obligation is recognized when, as at financial reporting date, all of the following criteria are met: (i) There is a legal obligation to incur retirement costs in relation to a tangible capital asset; (ii) The past transaction or event giving rise to the liability has occurred; (iii) It is expected that future economic benefits will be given up; and, (iv) A reasonable estimate of the amount can be made. The estimate of the asset retirement obligation includes costs directly attributable to the asset retirement activities and is recorded as a liability and increase to the related tangible capital assets if the tangible capital asset is in productive use. The asset retirement obligation is recorded as a liability and expense if the related tangible capital asset is unrecognized or no longer in productive use. 2 Restricted assets: The City has restrictions on the portfolio investments and cash available for operational use as follows: 2025 2024 Cash 61,801,672 $ 63,041,295 $ Portfolio Investments 178,275,843 176,033,434 240,077,515 239,074,729 Less restricted for: Statutory Reserve Funds 28,590,452 35,916,213 Restricted Revenue 59,462,632 57,157,637 88,053,084 93,073,850 Funds available for operational use 152,024,431 $ 146,000,879 $ The investment portfolio includes bonds of chartered banks, the Government of Canada and provincial governments; deposits and notes of chartered banks, credit unions, the Government of Canada and provincial governments; and deposits in the Municipal Finance Authority short term investment pools. CITY OF CHILLIWACK NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2025 City of Chilliwack Notes to Consolidated Financial Statements Year Ended December 31, 2025 3 Accounts receivable: 2025 2024 Taxes 8,652,697 $ 7,685,195 $ Province of British Columbia 7,459,249 7,001,778 Government of Canada 1,398,957 670,353 Regional and local governments 279,209 862,957 Trade receivables 15,044,967 13,803,782 Accrued interest 2,855,636 3,124,605 Development cost charges 1,127,503 1,716,763 36,818,218 $ 34,865,433 $ 4 Accounts payable and accrued liabilities: 2025 2024 Trade payables 23,255,601 $ 21,813,185 $ Province of British Columbia 4,560,477 3,959,357 Government of Canada 10,832,538 10,406,439 Regional and local governments 769,758 2,299,441 39,418,374 $ 38,478,422 $ 5 Development cost charges: The development cost charge liability, reported as unearned revenue, represents funds received from developers for capital infrastructure expenditures required as a result of community growth. As these funds are expended on eligible projects, the liability is reduced and the amount expended reported as revenue. Developers are entitled to pay development cost charges (DCCs) in equal installments over two years if the total amount payable is equal to or greater than $50,000. Installments due for the next two years are included in accounts receivable and are guaranteed by the developer by providing an irrevocable letter of credit payable to the City of Chilliwack for the remaining amount of DCCs owing. As at December 31, 2025, the amount of the DCCs due over the next two years is $1,127,503 (2024 - $1,716,763). Assets are not physically segregated to meet the requirements of the restricted revenues. As related expenditures are incurred, revenue is recognized. 6 Asset retirement obligation: The City owns and operates several assets that are known to have asbestos or other contaminants, which represent a health hazard upon demolition or renovation of the assets. There is a legal obligation to remove and dispose of the hazardous materials. The City infrastructure also includes water wells which have a legal obligation to decommission at the end of their use. The City also has an operating landfill that requires closure and post closure site remediation. Following the adoption of Public Accounting Standard PS 3280 Asset Retirement Obligations, the City recognized an obligation relating to the removal of hazardous materials in these assets, the decommissioning of wells and updated the landfill closure and post closure costs effective January 1, 2023. Estimated costs totaling $26,357,577 (2024 - $25,809,317) have been discounted using a present value calculation with a discount rate of 3.73% (2024 - 4.4%). The timing of these expenditures is estimated to occur between 2026 and 2239 with regular replacement, renovation, or disposal of assets. No recoveries are expected at this time. A summary of the change in the liability is as follows: 2025 2024 Opening asset retirement obligation 13,195,639 $ 11,354,632 $ Increase due to accretion 505,773 506,982 Change in estimate 1,722,709 1,334,025 Asset retirement obligations, end of year 15,424,121 $ 13,195,639 $ 7 Property under development: The property under development relates to projects of Chilliwack Economic Partners Corporation as follows:
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