Notes to the Financial Statements General The Ontario Clean W ater Agency The Agency was established on November 15 1993 under the authority of The Capital Investment Plan Act 1993 the Act In accor dance with the Act the Agency s objectives include assisting municipalities to pr ovide water and wastewater services on a costr ecovery basis by fnancing planning developing building and operating such works and services fnancing building and operating water and wastewater facili ties on behalf of Ontario on a costr ecovery basis and pr oviding these services to pr otect human health and the envir onment encouraging conservation of water r esour ces and supporting Pr ovincial policies for land use and settlement The Agency is exempt fr om Federal and Pr ovincial income taxes 1 SIGNIFICANT ACCOUNTING POLICIES The Agency is classifed as a gover nment notfor pr oft for fnancial r eporting purposes These fnancial statements ar e pr epar ed by management in accor dance with Canadian public sector accounting standar ds for pr ovincial r eporting entities established by the Canadian Public Sector Accounting Boar d The signifcant accounting policies ar e as follows a Cash and shortterm investments Cash and shortterm investments ar e liquid investments with maturities due within one year and ar e r ecor ded at cost Accrued inter est is r ecor ded in accounts r eceivable b T angible Capital Assets Major capital expenditur es with a futur e useful life beyond the curr ent year ar e capitalized at cost T angible Capital Assets ar e amortized on a straightline basis as follows Computer softwar e 2 7 years Information systems 7 years Fur nitur e and fxtur es 5 years Automotive equipment 4 20 years Computer har dwar e 3 7 years Machinery and equipment 5 years Leasehold impr ovements Life of the lease c Revenue Recognition Revenue on contracts with clients for the operation of water a nd wastewater tr eatment facilities based on a fxed annual price is r ecognized in equal monthly amounts as ear ned Revenue on contracts with clients based on the r ecovery of costs plus a per centage markup or r ecovery of costs plus a fxed management fee is r ecognized at the time such costs ar e incurr ed Revenue for additional work for clients outside the scope of the operations and maintenance contract such as capital r epairs on equipment is r ecognized when the costs ar e incurr ed and normally includes a pr edetermined markup on cost 30 Ontario Clean W ater Agency 2012 Annual Report