The Federal Budget Surplus: Surprise or Strategy?

Canadian federal government registered 11 consecutive budgetary surpluses between 1997 and 2007. In the Canadian context, the federal surplus often has two components: the planned component and the surprise component; the latter appearing when the actual budgetary balance exceeds the planned surplus. This paper discusses whether the constantly reappearing federal budget surprise surpluses are a desirable attribute of the budgetary policy. To this end, the paper presents a brief overview of the federal surplus, the main causes leading to their reappearance, and examines negative implications associated with federal surpluses. The analysis shows that surprise surpluses may lead to eroding the credibility of the budget process, increasing pressure to spend the excessive fiscal room, pro-cyclical nature of fiscal policy and eroded vigilance of maintaining a steady level of spending. Inaccurate budget projections, but also the invisible political pressure to avoid deficits are among the main causes of the surprise surpluses.national budget, budget surplus, national debt, budget forecasting

Where Has the Money Gone: The State of Canadian Household Debt in a Stumbling Economy

Increasing debt of Canadian households has been a subject of intense discussion for a good number of years. In the current economic situation, thought, the topic of household indebtedness is rapidly becoming a more critical area. This paper seeks to understand the extent to which the 2008 economic and financial crisis worsened financial positions of Canadian households. To that end, the paper imparts the key findings of the public opinion survey commissioned in 2008, considers changes in the main indicators of household indebtedness, and discusses the implications of the economic shocks on indebted households. The analysis shows that the measures of financial wellbeing of the household sector have deteriorated significantly over 2007 and particularly in 2008. Stagnant or even declining income, slow and lengthy process of rebuilding financial wealth and increasing real debt-service burden make the prospects of improving households’ financial situation in the near future low.household debt, household finances, savings, wealth, household spending, income shock, assets price shock

Carbon Revenue Recycling - Opportunities and Challenges

Environmental policy instruments that generate budget revenues may become an increasingly attractive policy option for Canada's federal government due to amplified fiscal pressures. If that is the case, revenue recycling is an essential element of pricing carbon. This paper present a brief overview of benefits of recycling carbon revenues and the challenges that may be encountered when choosing a specific option for revenue recycling. The analysis shows that the existing research leaves the open-ended question of which taxes should be used for revenue recycling unanswered; particularly in the Canadian context. Given this, the economic efficiency of different types of taxes could be used as a source of general guidance for revenue recycling. However, significant doubt exists that there is sufficient political will to recycle carbon revenue. Over the past two decades, the tax composition of the federal revenue continued shifting towards a higher reliance on economically distortive taxes instead of increasing use of more efficient taxes.carbon emission reduction, carbon revenue recycling, double dividend, carbon pricing

Does Canada Have a Problem with Occupational Fraud?

Small and medium-sized enterprises (SMEs) are an important collective force in the Canadian economy, however the visibility and economic power of small businesses suffer due to their size and frequent turnover. When it comes to the issue of businesses being subject to occupational fraud, the moderate visibility of SMEs only contributes to the challenge of assessing the real scope of the problem. This paper seeks to examine the prevalence and types of occupational fraud experienced by Canadian SMEs as well as gathers information on prevention and detection methods used to safeguard against occupational fraud. That is done based on data compiled from a survey of 802 SMEs across Canada. The analysis shows that a substantial proportion of SMEs experience incidents of occupational fraud; however, the majority of SMEs are not fully prepared to respond to fraud. Furthermore, SMEs’ experience with and attitudes toward fraud vary noticeably with company characteristics, although a large proportion of SMEs believe risk to occupational fraud is low.Occupational fraud, fraud prevention, fraud detection, types of occupational fraud, Canadian small and medium businesses, employee fraud, internal fraud

Planning for Retirement - There is no Substitute

Retirement planning is often seen as a tool that may assist individuals to successfully accumulate retirement capital. However, the low level of ‘customization’ of the general information on retirement planning may prompt some individuals to oversimplify their approach to retirement savings while discouraging others. Given the already weak propensity of Canadian households to accumulate retirement savings, this paper seeks to accentuate the importance associated with – and the complexity involved in – choosing the mix of savings instruments for accumulating retirement capital. The analysis shows that relying on private retirement savings continues to be of high importance for Canadian households. Some individuals may achieve the best saving outcome through the strategy that often would not be viewed as “saving for retirement”; however, comparing the outcomes of different savings options is challenging. Considering planning for retirement in broader terms than just setting aside a portion of monthly income may be beneficial as the narrow focus may overlook some important strategies of accumulating retirement capital.planning for retirement, Canadain retirement income system, savings instruments, funding postion of pension plans, household savings, registered retierment savings plans, tax-free savings accounts, retirement savings, retirement income,

Fair Value Accounting: The Road to Be Most Travelled

Fair value convention has polarized two opposing views – the first, that fair value accounting compounds economic hardship and distortion – and the second, that fair value accounting affords an accurate rendering of the market value of underlying assets and liabilities. This paper intends to clarify some of the underlying arguments by presenting a brief overview of fair value accounting, and the main advantages and disadvantages of using fair value regime. The analysis shows that only certain assets and liabilities are required to be measured at fair value and the degree to which unrealized gains and losses associated with fair value measurement are reflected in the financial statements depends on the intended use of assets and liabilities in question. The two main arguments against fair value accounting – exacerbated procyclicality and increased volatility of the financial statements – are amply counterbalanced by arguments in favour of fair value accounting. The latter includes the significance of limitations associated with historical cost accounting, increased relevance of information presented to investors and lower expected likelihood of earnings management under fair value accounting.fair value accounting, accounting, accounting standards