ASSOCIATION OF ALBERTA MUNICIPALITIES

Notes to the Consolidated Financial Statements

Year ended December 31, 2022

These consolidated financial statements consist of the assets, liabilities, net assets and operations of Association of Alberta Municipalities (“ABmunis”), formerly Alberta Urban Municipalities Association, its wholly owned subsidiary Alberta Municipal Services Corporation (“AMSC”), and AMSC Insurance Services Ltd. (“AMSCIS”), a wholly owned subsidiary of AMSC. Transactions between ABmunis and its subsidiaries, which are related parties, have been eliminated on consolidation. ABmunis also provides administration and agency services to Alberta Municipal Insurance Exchange (“MUNIX”) and APEX Supplementary Pension Plan whose results are not included in these consolidated financial statements.

ABmunis is a provincial organization that provides leadership in advocating local government interests to the provincial government and other organizations. AMSC and AMSCIS operate as business service delivery providers of shared corporate, networked products and services for municipalities and other local government entities. AMSC offers an energy retail program, an aggregated investment program, retirement services, and purchasing program services. AMSC also operates two commercial real estate properties. AMSCIS provides general insurance, employee group benefits and related coverage for the members of ABmunis.

ABMunis is a non-taxable association by virtue of section 149(1)(d.5) of the Income Tax Act.

1. Significant accounting policies:

These consolidated financial statements have been prepared in accordance with Canadian accounting standards for not-for-profit organizations in Part III of the CPA Canada Handbook ("Part III")

Significant accounting policies are as follows:

(a) Cash:

ABmunis considers deposits in the bank and deposits in the AMSC-administered High Interest Savings Account as cash.

(b) Deposits with property manager:

Deposits with property manager is cash held with a property management company for the purposes of managing the Alberta Municipal Place ("AMP") property.

(c) Other assets:

Other assets include payments for tenant improvements, leasing commissions, as well as deferred costs associated with the “step-up” features of the lease agreements signed with tenants of the managed property.

The tenant improvements and leasing commissions are amortized using the straight-line method over the applicable non-cancelable lease term and are recorded at the lower of cost less accumulated amortization and net realizable value.

The step-up leases stipulate that the rental rate will increase by predetermined amounts at various points in the future. Rental revenue is recognized on a straight-line basis over the lease term in accordance with Canadian generally accepted accounting principles for non-for-profit organizations in Part III; as such, a deferred rent asset equal to the difference between the actual rent received and the average rent over the lease term will build up in the first half of the lease term and then will be amortized into income over the latter part of the lease term, eventually being reduced to nil.