Quarterly financial statistics for enterprises, first quarter 2020

Data on quarterly net income before taxes in this release are seasonally adjusted and expressed in current dollars, unless otherwise stated.

For information on seasonal adjustment, see Seasonally adjusted data – Frequently asked questions.

Quarterly financial statistics for enterprises are based on a sample survey and represent the activities of all corporations in Canada, except those that are government-controlled or not-for-profit. The survey collects data on balance sheet, income statement and additional disclosures of enterprises.

An enterprise can be a single corporation or a family of corporations under common ownership and/or control, for which consolidated financial statements are produced.

Survey changes

The following changes were introduced to the survey starting with the first quarter of 2020:

1. New content was implemented this quarter to align the survey to new accounting standards adopted by corporations starting in 2011.
2. New industrial breakdowns, which allow for more granularity in the dissemination of data, were implemented. As a result, some industry groupings were merged, others were split and some remained the same.
3. The survey's sample was modified to support the new industrial breakdowns; however, a maximum sample overlap with the previous sample was adopted.
4. A more automated imputation strategy was implemented to streamline the process and to reduce the need for manual intervention.

Analytical focus change

Up to the fourth quarter of 2019, the Quarterly Survey of Financial Statements (QSFS) focused primarily on operating profit/losses to track the financial performance of enterprises. Operating profit are profits an enterprise earns from its core business operations and is the difference between operating revenues and operating expenses.

The content for the QSFS questionnaire, up until the fourth quarter of 2019, did not include a distinction between operating revenue and expenses. To calculate an enterprise's operating profit, additional information on expenses, in particular, cost of goods sold (COGS), was collected and included in the calculation.

Over time, the response rate for the COGS variable declined. As well, the accounts used by financial industries and non-financial industries were different due to the nature of their activity, with some enterprises no longer reporting operating profits in their financial statements.

Changes to accounting standards in 2006 (new financial instruments standards), and in 2011 (adoption of International Financial Reporting Standards) included the introduction of gains/losses in asset revaluations, which further complicated the calculation of operating profits.

Asking respondents to report categories of revenue and expenses as well as a breakdown, within each of those two categories, between operating and non-operating amounts would have increased response burden.

Being an economy-wide program, the QSFS requires a certain degree of comparability in the concepts used to assess financial performance across enterprises and industries.

To overcome some of the difficulties in terms of comparability at the operating profit level, and to avoid increased response burden, starting with the first quarter of 2020, the focus of QSFS analysis will change from operating profit to net income before taxes to better assess an enterprise's financial performance. Net income before taxes is income earned from normal business activities.

Net income before taxes is a more inclusive measure, and its calculations are more standardized between enterprises and industries.

Revisions, benchmarking and back casting

The first quarter 2020 release of the QSFS includes revised estimates from the fourth quarter of 2017 to the fourth quarter of 2019, reconciled to the 2017 and 2018 annual series. Additional revisions have been made to the fourth quarter estimates of the previous year as a result of receipt of new survey data from respondents. However, changes in methodology and content, have made it difficult to compare first quarter 2020 to historical data.

Efforts are being made to back-cast these data to the first quarter of 2010 to allow for better historical comparisons. However, as more than one cycle of the new content is required before being able to start this exercise, users are cautioned to be careful when making historical comparisons.

It is expected that the back-casting work will be completed and results released at the end of 2021.

Larger than usual revisions may be anticipated in the future, as quarterly revisions, annual benchmarking, back casting and receipt of new survey data from respondents will be incorporated in order to improve data quality and include the most up-to-date data.

Next release

Financial statistics for enterprises for the second quarter of 2020 will be released on August 25.