Notes to the Financial Statements

For the Year ended March 31, 2026

(In thousands of Canadian dollars)

1. Authority, mandate and programs

CATSA was established pursuant to the CATSA Act on April 1, 2002. CATSA is a Crown corporation listed under Part I, Schedule III of the Financial Administration Act (FAA) and is an agent of His Majesty in right of Canada.

CATSA’s mandate is to provide effective and efficient screening of persons who access aircraft or restricted areas through screening points, the property in their possession or control and the belongings or baggage that they give to an air carrier for transport. CATSA is also responsible for ensuring consistency in the delivery of screening across Canada and for air transport security functions that the Minister of Transport may assign to it, subject to any terms and conditions that the Minister may establish. In carrying out its responsibilities, CATSA must do so in the public interest, having due regard to the interest of the travelling public.

To achieve this, CATSA conducts screening in the following four areas:

Pre-board Screening (PBS)
The screening of all passengers, their carry-on baggage and their belongings prior to their entry to the secure area of an air terminal building;

Hold Baggage Screening (HBS)
The screening of passengers’ checked (“hold”) baggage for prohibited items such as explosives, prior to being loaded onto an aircraft;

Non-passenger Screening (NPS)
The screening of non-passengers such as flight personnel, ground crew and service providers, and their belongings (including vehicles and their contents) entering restricted areas at the major airports; and

Restricted Area Identity Card (RAIC)
The management of the system that uses iris and fingerprint biometric identifiers to allow authorized non-passengers access to the restricted areas of airports. The final authority that determines access to the restricted areas of an airport is the airport authority.

In addition to its mandated activities, CATSA has an agreement with Transport Canada to conduct screening of a limited amount of cargo at smaller airports where screening capacity exists, using existing resources, technology, and procedures.

CATSA may provide screening services on a cost-recovery basis to both designated and non-designated airports upon the approval of the Minister of Transport. In 2025/26, CATSA signed an agreement with the Montreal Metropolitan Airport (MET) to support the launch of commercial operations in 2026/27.

In January 2026, P.C. 2026-0009 was issued pursuant to section 89 of the FAA, which directs CATSA to align its policies, guidelines and practices with the Buy Canadian Procurement Policy Framework and the policy instruments issued under section 6 of that framework, in a manner that is consistent with its mandate. CATSA aligned its policies, guidelines and practices by April 1, 2026, with implementation reported in CATSA’s 2026/27 to 2030/31 Corporate Plan.

CATSA is in compliance with Order in Council P.C. 2019-783, a directive issued pursuant to Section 89 of the FAA, which outlines certain principles with regards to CATSA’s pension plans.

CATSA’s Travel, Hospitality, Conference and Event Expenditures Policy is in compliance with Order in Council P.C. 2015-1114, a directive issued pursuant to Section 89 of the FAA, which requires CATSA’s policies, guidelines and practices to be aligned with Treasury Board policies, directives and related instruments on travel, hospitality, conference and event expenditures in a manner that is consistent with its legal obligations.

CATSA is not subject to income tax under the provisions of the Income Tax Act (Canada). CATSA is subject to the Excise Tax Act (Canada), which includes the federal Goods and Services Tax (GST) and Harmonized Sales Tax (HST). CATSA is also subject to all provincial sales taxes (PST) applied by the provinces and territories in which it operates. CATSA is a GST/HST registrant. As a GST/HST registrant, CATSA is obligated to collect and remit taxes on taxable services supplied to external parties and CATSA’s pension plans.

2. Basis of preparation

The financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board (IASB) and approved by the Accounting Standards Board of Canada (AcSB).

The financial statements were prepared under the historical cost convention, except as required or permitted by IFRS and as indicated in the Summary of material accounting policy information note. Historical cost is generally based on the fair value of the consideration given up in exchange for goods and services at the transaction date.

3. Summary of material accounting policy information

(a) Use of estimates and judgments

The preparation of these financial statements in accordance with IFRS requires management to make judgments, estimates and assumptions based on existing knowledge that affects the reported amounts and disclosures in the financial statements and accompanying notes. Actual results may differ from judgments, estimates and assumptions.

In making estimates and using assumptions, management relies on external information and observable conditions where possible, supplemented by internal analysis as required. These estimates and assumptions have been applied in a manner consistent with prior periods. There are no known commitments, events or uncertainties that management believes will materially affect the methodology or assumptions utilized in making these estimates in the financial statements.

Estimates and underlying assumptions are regularly reviewed by management and changes in those estimates are recognized prospectively in the period of change, if the change affects that period only; or the period of the change and future periods, if the change affects both.

The critical estimates and assumptions utilized in preparing these financial statements include:

• note 3(b), note 3(c), note 5 and note 6 – Property and equipment and intangible assets

Key estimates used for property and equipment include the determination of their useful lives and the valuation of work-in-progress. The key estimate used for intangible assets includes the determination of their useful lives. In determining the expected useful lives of these assets, CATSA considers past experience, industry trends and internally-specific factors, such as changing technologies and expectations for the in-service period of the assets. Changes to estimates of useful life would affect future depreciation or amortization expenses and future carrying values of assets. In determining the value of work-in-progress, CATSA considers estimates provided by internal experts. Changes to the stage of completion would affect trade and other payables and the values of assets.

• note 3(e) and note 7 – Leases

Key estimates used for right-of-use assets and lease liabilities include the determination of an appropriate incremental borrowing rate to discount the lease payments, when the interest rate implicit in the lease is not readily determinable. As CATSA does not have borrowing authority and, in practice, does not have readily observable approved or granted borrowing rates from a financial institution, CATSA’s approach to determining its incremental borrowing rate is based on the Bank of Canada zero-coupon bond rate, CATSA’s entity-specific credit spread, and the lease-specific spread. CATSA’s entity-specific credit spread, and lease-specific spread are based on a publicly available yield curve that reflects Canadian agencies with investment grade ratings. The rate used to discount CATSA’s lease payments is also based on the identified lease term.

• note 3(g) and note 8 – Employee benefits

Key estimates used for employee benefits include the discount rate, mortality rate, inflation rate, long-term rate of compensation increase and assumed medical cost trend rates. In determining the assumptions, CATSA takes into account past experience, the expertise of its actuaries, and current market conditions and rates. Changes to these assumptions would affect its employee benefits asset and liability, as well as financial performance and other comprehensive income or loss. A sensitivity analysis of changes in primary assumptions is presented in note 8.

The critical judgments made by management in preparing these financial statements include:

• note 3(e) and note 7 – Leases

Judgments are required to determine whether it is reasonably certain that an extension or termination option will be exercised for contracts that contain a lease. In making this assessment, management considers several factors, including the nature of CATSA’s work, proximity of other locations, lease extensions exercised in the past, market conditions, recent leasehold improvements and contract specific termination clauses.

Judgments are required in determining whether variable lease payments are in-substance fixed. In-substance fixed lease payments are payments that may, in form, contain variability but that, in substance, are unavoidable. Such payments are included in the measurement of the lease liability. In determining whether variable lease payments are in-substance fixed, CATSA reviews lease contracts to assess the nature of the payments, specifically identifying if payments are subject to adjustments based on actual costs incurred, or payments are based on services that are variable in nature.

(b) Property and equipment

Property and equipment consists of screening equipment, RAIC equipment, computer, electronic and other equipment, leasehold improvements and work-in-progress.

Recognition and measurement

Property and equipment are recorded at cost, less accumulated depreciation, except for work-in-progress, which is recorded at cost but not depreciated until the asset is available for use. Cost includes expenditures that are directly attributable to the acquisition and installation of the assets, including integration costs related to the installation of the assets at the airports to ensure they are in a condition necessary for their intended use. These costs include conveyor systems, platforms and other structures required to connect screening equipment to existing airport infrastructures.

The carrying amount of an item of property and equipment is derecognized on disposal, or when no future economic benefits are expected from its use or disposal. Gains and losses on disposal of an item of property and equipment are determined by comparing proceeds, if any, to the carrying amount and are recognized in financial performance.

Subsequent costs

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to CATSA and that the cost of the item can be measured reliably. The cost of day-to-day servicing of property and equipment is recognized in financial performance as incurred.

Depreciation

Depreciation is calculated using the straight-line method and is applied over the estimated useful lives of the assets.

Leasehold improvements are depreciated on a straight-line basis over the shorter of the related lease term or estimated useful life.

Depreciation methods, estimated useful lives, and residual values are reviewed at least annually.

(c) Intangible assets

Separately acquired computer software licences are capitalized based on the costs incurred to acquire and bring the licences to use.

Certain costs incurred in connection with the development of software to be used internally or for providing screening services are capitalized once a project has progressed beyond a conceptual, preliminary stage to that of application development. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by CATSA are recognized as intangible assets when the following criteria are met:

• it is technically feasible to complete the software product so that it will be available for use;
• management intends to complete the software product and use it;
• there is an ability to use the software product;
• it can be demonstrated how the software product will generate probable future economic benefits;
• adequate technical, financial and other resources to complete the development of the software product and to use it are available; and
• the expenditure attributable to the software product during its development can be reliably measured.

Costs that qualify for capitalization include both internal and external costs but are limited to those that are directly related to the specific project. All other costs associated with developing or maintaining computer software programs are expensed as incurred.

Intangible assets are amortized using the straight-line method over their estimated useful lives of five to 15 years.

(d) Impairment

CATSA’s assets do not generate cash flows. Instead, all assets interact to support CATSA’s mandated activities, which are primarily funded by parliamentary appropriations. Overall levels of cash flow, provided by budgetary funding, reflect public policy requirements and decisions. Therefore, CATSA is considered one cash-generating unit (CGU).

The carrying amounts of CATSA’s property and equipment and intangible assets are reviewed at each reporting period to determine whether there is any indication of impairment. Assets are tested at the CGU level when they cannot be tested individually. Property and equipment and intangible assets are considered to be impaired if they are no longer able to contribute to CATSA’s mandate.

(e) Leases

Contracts are considered to be a lease when the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Right-of-use assets

CATSA’s right-of-use (ROU) assets are initially measured at cost based on the following:

• amount of the initial measurement of the lease liability; and
• lease payments made at or before the commencement date, less any lease incentives received.

An ROU asset is subsequently measured at cost less accumulated depreciation. The carrying amount of the right-of-use asset may be adjusted for certain remeasurements of the lease liability, if any. An ROU asset is depreciated using the straight-line method over the lease term. The lease term includes periods covered by an option to extend if CATSA is reasonably certain to exercise that option.

Lease Liabilities

CATSA’s lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, CATSA’s incremental borrowing rate, as identified above in note 3(a).

CATSA’s entity-specific credit spread and lease-specific spread are based on a publicly available yield curve that reflects Canadian agencies with investment grade ratings.

The lease liability is subsequently measured at amortized cost using the effective interest rate method. It is remeasured whenever:

• there is a change in the lease term, including a change in the assessment of whether an extension option will be exercised;
• the payments change due to changes in an index or rate, or a change in expected payments under a residual value guarantee; and
• a lease contract is modified and the lease modification is not accounted for as a separate lease.

Based on the nature and use of CATSA’s right-of-use assets, CATSA has two classes of underlying assets: office space and data centres. CATSA accounts for lease components and any non-lease components as a single lease component for its office space asset class. For its data centre asset class, CATSA separates non-lease components from lease components and accounts for them separately.

CATSA does not recognize right-of-use assets and lease liabilities for short term leases that have a lease term of 12 months or less, or leases of low dollar value. In addition, CATSA does not include variable costs associated with leases in its lease liabilities and right of use assets. The above payments are recognized as an expense when incurred.

(f) Financial instruments

Non-derivative financial assets

Non-derivative financial assets include cash and receivables related to other screening services. The remaining receivables are not classified as non-derivative financial assets because they relate to statutory requirements of the federal and provincial governments.

Cash and receivables related to other screening services are recognized initially at fair value. Subsequent to initial recognition, these financial assets are measured at amortized cost using the effective interest rate method. At each reporting date, CATSA assesses, on a forward-looking basis, the expected credit losses on any financial assets measured at amortized cost.

CATSA derecognizes a non-derivative financial asset when the contractual rights to the cash flows from the asset are either collected, expire or are transferred to another party.

Non-derivative financial liabilities

Non-derivative financial liabilities include trade and other payables and holdbacks. Trade and other payables and holdbacks are recognized initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortized cost using the effective interest rate method.

CATSA derecognizes a non-derivative financial liability when its contractual obligations are discharged, cancelled or expired.

Derivative financial instruments

Derivative financial instruments include foreign exchange forward contracts entered into by CATSA for the purpose of managing its exposure to foreign currency risk as it relates to its request for parliamentary appropriations. CATSA does not apply hedge accounting to its derivative financial instruments.

(g) Employee benefits

Post-employment benefit plans – defined benefit

The employee benefits asset and liability presented in the Statement of Financial Position represent the actual surplus or deficit of each of CATSA’s defined benefit pension plans and its other defined benefits plan. The surplus or deficit is determined by estimating the amount of future benefit that employees have earned in return for their service in the current and prior years. The future benefit is then discounted to determine its present value, using a discount rate established at the end of the reporting period. The obligation is recognized over the period of employee service determined actuarially using the projected unit credit method. To the extent applicable, the fair value of any plan assets is deducted from the present value of the future benefit obligation. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.

Defined benefit costs are categorized as follows:

• service costs;
• net interest on the net defined benefit asset or liability;
• administration costs; and
• remeasurements.

Service costs are determined separately for each plan using the projected unit credit method, with actuarial valuations for accounting purposes being carried out at the end of each annual reporting period. Current service cost is recognized as employee costs in determining financial performance. Employee contributions are recorded as a reduction to service cost in the period in which the related service is rendered. Administration costs paid from the plan assets during the period exclude the costs of managing plan assets, as those costs are recorded against the actual return on plan assets.

Net interest is calculated by applying the discount rate used to discount the post-employment benefit obligation to the net defined benefit asset or liability, taking into account any changes in the net defined benefit asset or liability during the period as a result of contribution and benefit payments. Net interest is recognized as employee costs in determining financial performance.

Remeasurement of defined benefit plans consists of actuarial gains and losses, the return on plan assets (excluding interest) and the effect of changes in the asset ceiling (if applicable). When a funded plan gives rise to a net pension benefit asset, a remeasurement for the effect of the asset ceiling may occur if it is established that the surplus will not provide future economic benefits with respect to future service costs. Those future economic benefits are available under the terms of CATSA’s defined benefit pension plans, which allow CATSA to take contribution holidays when certain funding thresholds are met.

Remeasurement of defined benefit plans is recognized in other comprehensive income or loss and is included immediately in accumulated surplus (deficit) without reclassification to financial performance in a subsequent period.

Post-employment benefit plan – defined contribution

Employer contributions to the defined contribution pension plan are recognized as an employee cost in financial performance when employees have rendered service entitling them to the contributions.

Termination benefits

Termination benefits result from either CATSA’s decision to terminate employment or an employee’s decision to accept the entity’s offer of benefits in exchange for termination of employment. CATSA recognizes termination benefits at the earliest of when the entity can no longer withdraw the offer of those benefits or when restructuring costs are accrued if termination benefits are part of a restructuring plan. If benefits are payable more than 12 months after the reporting period, the liability is determined by discounting the obligation to its present value.

Short-term employee benefits

Short-term employee benefit obligations, such as salaries, annual leave and bonuses, are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized in trade and other payables for the amount expected to be paid when CATSA has a present legal or constructive obligation to pay the amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(h) Provisions and contingencies

A provision is recognized when, as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle a present legal or constructive obligation, and the obligation can be estimated reliably. In situations where the amount of the obligation cannot be measured with sufficient reliability or the cash outflows are not probable, a contingent liability is disclosed.

Contingent liabilities may arise from uncertainty as to the existence of a liability or represent an existing liability in respect of which settlement is not probable or, in extremely rare cases, the amount cannot be reliably measured. A liability is recognized when its existence is confirmed by a future event, settlement becomes probable and reliable measurement becomes possible.

Disputed claims

In the normal course of operations, CATSA receives claims requesting monetary compensation from various parties. A provision is accrued to the extent management believes it is probable that a disputed claim arising from a past event results in a present legal or constructive obligation, and the obligation can be estimated reliably. If the timing of the cash outflows associated with the disputed claim can be reasonably determined to be more than 12 months after the reporting period, the provision is determined by discounting the expected future cash flows at a rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Decommissioning costs

CATSA has future obligations associated with the disposal of certain screening equipment in an environmentally responsible manner, and the restoration of leased premises to an agreed upon standard at the end of the lease. To the extent that it is probable that these obligations will result in an outflow of economic benefits, CATSA recognizes a provision for decommissioning liabilities, and the costs are capitalized as part of the carrying amount of the related asset and depreciated over the asset’s estimated useful life.

Given the nature of provisions and contingencies, judgments and estimates are required in determining the existence and amount of an obligation.

(i) Government funding

CATSA’s primary source of funding is parliamentary appropriations received from the Government of Canada. Parliamentary appropriations are accounted for as Government of Canada grants and are recognized in financial performance on a systematic basis over the periods in which CATSA recognizes as expenses the related costs for which the grants are intended to compensate.

Appropriations related to operating expenses for future periods are recorded as deferred government funding related to operating expenses and are recognized in financial performance in the period in which the related expenses are incurred. Appropriations used for the purchase of property and equipment and intangible assets are recorded as deferred capital funding and are amortized on the same basis as the related assets.

Upon the disposal of funded depreciable assets, the related remaining deferred government funding is recognized in financial performance in the period of disposal.

Appropriations used for lease payments are recognized in financial performance in the period in which lease payments are made.

Unused parliamentary appropriations at year end are lapsed or reprofiled to future years.

4. Trade and other receivables

Trade and other receivables are comprised of:

Other screening services, relate to Montreal Metropolitan Airport (MET) services that are provided on a cost-recovery basis.

5. Property and equipment

A reconciliation of property and equipment is as follows:

6. Intangible assets

A reconciliation of intangible assets is as follows:

7. Leases

Right-of-use assets

A reconciliation of right-of-use assets is as follows:

Lease liabilities

CATSA has included extension options in the measurement of its lease liabilities when it is reasonably certain to exercise the extension option.

A reconciliation of lease liabilities is as follows:

The following table presents the undiscounted cash flows for contractual lease obligations:

8. Employee benefits

Post-employment benefit plans overview

CATSA maintains three post-employment benefit plans:

• A registered pension plan (RPP), which is registered with the Office of the Superintendent of Financial Institutions and with the Canada Revenue Agency (CRA) and contains both a defined benefit and a defined contribution component;
• A supplementary retirement plan (SRP), which supplements the defined benefit component of the RPP for benefits limited by the Income Tax Act (Canada) and is funded by a retirement compensation arrangement regulated by the CRA; and
• An other defined benefits plan (ODBP), which includes life insurance and eligible health and dental benefits.

CATSA’s defined benefit pension plans consist of the defined benefit component of the RPP and the SRP. Pension benefits are based on the average of the best five consecutive years of pensionable salary and are indexed to the average Consumer Price Index (CPI) for the 12-month period ending September 30th of the previous year. CATSA’s defined contribution pension plan consists of the defined contribution component of the RPP. Upon retirement, all full-time and parttime indeterminate employees, when taking an immediate pension, are eligible for the ODBP. Defined contribution pension plan members must be 60 years old and with minimum two years of service to be eligible for the ODBP.

The defined benefit pension plans’ funds are held in external trusts that are legally separate from CATSA. Benefits are paid directly from the trusts. Both employer and employee contributions to the defined benefit pension plans are made in accordance with the provisions of the plans. In addition, contributions are determined by actuarial valuations in accordance with applicable legislation. On July 1, 2013, the defined benefit pension plans were closed to new employees.

Effective July 1, 2024, the CRA, in accordance with the Income Tax Act and the plan’s funding level, required CATSA to take a forced employer contribution holiday to the RPP (defined benefit component only).

CATSA maintains a defined contribution pension plan for employees hired on or after July 1, 2013. Enrollment in this plan is mandatory for full-time indeterminate employees, as well as part-time indeterminate employees working an average of more than 20 hours per week. Under this plan, CATSA and its employees are required to contribute a specified percentage of salaries to fund the benefits, with optional contributions for employees matched at various levels by the employer based on years of service. CATSA’s financial obligation is limited to matching employee contributions, as outlined in the provisions of the plan.

Post-employment benefit plans’ risks

The defined benefit plans expose CATSA to actuarial risks such as inflation risk, interest rate risk, investment risk, longevity risk, medical claim rates risk and salary risk. In addition, the closed nature of the defined benefit pension plans will create a rise in future service costs as the plan members age. Current cost sharing provisions also increased employee contributions to a level beyond what is permitted by the Income Tax Regulations. CATSA obtained a waiver to exceed permitted limits from the CRA up to December 31, 2026.

Employee benefits assets and liabilities

The following provides a reconciliation between the defined benefit plans’ assets, the defined benefit plans’ liabilities and the surplus or deficit status of the defined benefit plans, to the net employee benefits asset or liability presented in the Statement of Financial Position for the years ended:

Employee benefits costs

The elements of employee benefits costs are as follows for the year ended:

Defined benefit cost is recognized in employee costs in note 11 and allocated among the program expenses in the Statement of Comprehensive Income (Loss).

Composition of plan assets

Based on the fair value at March 31, defined benefit plans’ assets are comprised of:

The fair value of all money market, equity, debt, real estate securities, and listed infrastructure is determined based on quoted market prices in active markets. The assets held by the CRA in the refundable tax account are held in a non-interest bearing account. The fair value is based on the amount transferred into the refundable tax account held by the CRA.

On a regular basis, an asset-liability modelling study is performed, which analyzes the timing and magnitude of future cash outflows of the defined benefit component of the RPP. It suggests an optimal investment structure to maximize investment returns while minimizing risk associated with the fluctuation of the benefit obligation due to variations in interest rates. As the obligation has similar characteristics to debt securities, the partial de-risking of the funded position is achieved via investments in debt securities while other types of investments are selected to increase the returns of the plan. This reduces the risk associated with the volatility of the funded position while not impairing future investment returns.

Actuarial assumptions and sensitivity analysis

The actuarial assumptions used to determine the present value of the obligations are management’s best estimates. They are established based on market expectations at the end of the reporting period, for the period over which the obligations are to be settled. The significant weighted average assumptions used to determine CATSA’s liabilities are as follows:

¹ 2026 and 2025: Canadian Pensioners’ Mortality 2014 - Public Sector, projected with improvement scale MI-2024 (100% / 95% load for males / females).

The sensitivity analysis below was determined based on changes to the respective assumptions occurring at March 31, 2026, while holding all other assumptions constant:

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that a change in assumptions would occur in isolation, as some of the assumptions may be correlated.

Future expected contributions

Under current legislation and regulations, the funding valuation of CATSA’s RPP is required to be filed annually, unless the ratio of the solvency plan assets to solvency liabilities is 1.2 or greater, in which case it would be required at least every three years. In the event of a solvency or going-concern deficit, regulatory authorities require special contributions to be made over specified future periods.

There is no current legislative or regulatory requirement to file a funding valuation for CATSA’s SRP or ODBP. However, CATSA’s internal policy expects that a funding valuation for the SRP will be performed whenever CATSA performs a funding valuation for the RPP.

The most recent actuarial valuations for funding purposes, and the next required actuarial valuations, are as follows:

CATSA estimates that cash payments to be made to its funded defined benefit pension plans for the year ending March 31, 2027, will total $2,883, and consist of CATSA contributions of $220 and plan participant contributions of $2,663.

Cash payments to be made to the unfunded ODBP for the year ending March 31, 2027, will be equal to the benefits paid to plan participants. CATSA estimates that cash payments to be made to the ODBP for the year ending March 31, 2027, will total $516.

As at March 31, 2026, the weighted average duration of the defined benefit obligation for the RPP, the SRP and the ODBP was 17.3 years (2025 – 18.7 years), 16.4 years (2025 – 17.2 years) and 17.6 years (2025 – 19.6 years), respectively.

Employee costs

The following table provides a breakdown of employee costs for the years ended:

9. Provisions and contingencies

Several claims and legal proceedings have been asserted or instituted against CATSA. By nature, these amounts are subject to many uncertainties, and the outcome of the individual matters is not always predictable. As at March 31, 2026, none of the above are expected, individually or in the aggregate, to have a material adverse effect on the financial statements.

Provisions

During the year ended March 31, 2026, there were no amounts recorded as a provision.

Contingencies – Decommissioning costs

CATSA has identified contingent liabilities associated with the restoration of facilities contractually required under lease agreements, as well as the removal of Explosives Detection Systems equipment from airports across Canada, some of which contain hazardous materials. Since it is not probable that an outflow of economic resources will be required to settle these legal obligations, no provision has been recorded in the financial statements. Should the probabilities change in the future, the maximum undiscounted cash flow required to settle these liabilities between 2026/27 and 2036/37 (2025 – 2025/26 and 2036/37) is estimated to be $3,093 (2025 – $3,123).

10. Government funding

Government funding

Parliamentary appropriations were as follows for the years ended:

¹ The capital reprofile in progress for the year ended March 31, 2025, was approved during the year ended March 31, 2026.

Parliamentary appropriations used to fund operating expenses, capital expenditures and lease payments were as follows for the years ended:

Deferred government funding

A reconciliation of the deferred government funding liability is as follows:

11. Expenses

The Statement of Comprehensive Income (Loss) presents operating expenses by program activity. The following table presents operating expenses by major expense type for the years ended:

¹ Other business related costs include travel expenses, conference fees, membership and association fees, and meeting expenses.

² Other administrative costs include insurance, network and telephone expenses, and facilities maintenance.

12. Fair values and risks arising from financial instruments

Fair values of derivative financial instruments

Derivative financial instruments include foreign exchange forward contracts that are measured at fair value on a recurring basis. Financial instruments recorded at fair value use a hierarchy to categorize inputs used in valuation techniques. The fair value hierarchy gives the highest priority to quoted prices and the lowest priority to unobservable inputs, with Level 1 being the highest and Level 3 being the lowest. CATSA’s derivative financial instruments are categorized as Level 2, based on observable inputs other than quoted prices.

The carrying amount and fair value amount of CATSA’s derivative financial instruments are equal to one another. Fair value is based on a discounted cash flow model based on observable inputs. There were no transfers between levels during the years ended March 31, 2026, or 2025.

Financial risk factors

CATSA is exposed to a variety of financial risks: market risk, liquidity risk and credit risk.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. CATSA’s key market risk relates to currency risk, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. CATSA is exposed to currency risk on its trade and other payables denominated in a currency other than the Canadian dollar (CAD), which is the functional currency of CATSA. The risk arises mainly from transactions denominated in United States dollars (USD). CATSA’s policy on currency risk requires that CATSA minimize currency risk to protect the value of foreign cash flows, both committed and anticipated, from the impact of exchange rate fluctuations. To that end, CATSA has implemented a strategy to help mitigate this risk by entering into foreign exchange forward contracts.

The following table provides the total foreign currency exposure related to amounts recorded in trade and other payables denominated in the USD and their CAD equivalent:

Assuming all other variables remain constant, a 5% depreciation or appreciation of the USD against the CAD would result in an increase or decrease in financial performance of $151 (2025 – $31).

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are to be settled by delivering cash or another financial asset. Liquidity risk is low since CATSA does not have debt instruments to service and receives regular funding from the Government of Canada. CATSA manages its liquidity risk by preparing and monitoring forecasts of cash flows for anticipated operating and investing activities. Also, the Board of Directors reviews and approves CATSA’s operating and capital budgets.

The following table summarizes the contractual maturities of these financial liabilities:

¹ Derivative financial liabilities include CATSA’s foreign exchange forward contracts.

CATSA’s strategy for managing liquidity risk remains unchanged from March 31, 2025.

Credit risk

Credit risk is the risk that a counterparty will default on its contractual obligations resulting in financial loss to CATSA. As a means of mitigating risk of financial loss from defaults, CATSA has adopted a practice of only extending credit to creditworthy counterparties. CATSA’s exposure and the creditworthiness of its counterparties are continuously monitored. CATSA establishes a credit loss provision that reflects the estimated lifetime credit loss of receivables.

CATSA is exposed to credit risk through its cash, other screening services receivables and foreign exchange forward contracts. The maximum exposure as at March 31, 2026, and 2025, was the carrying value of these assets. CATSA minimizes its credit risk by dealing only with reputable and high-quality financial institutions and as such is not subject to any significant concentration of credit risk.

13. Contractual commitments

In the normal course of operations, CATSA enters into contractual commitments for the supply of goods and services. The most significant commitments relate to contracts with screening contractors for the provision of screening services, as well as agreements with vendors for the maintenance of screening equipment and the supply of spare parts. These contractual commitments are subject to approved government funding and include termination rights that generally allow CATSA to terminate contracts with limited financial obligations.

The following table provides the remaining pre-tax balance on these contractual commitments:

14. Related party transactions

CATSA had the following significant transactions with related parties during the year.

Government of Canada, its agencies and other Crown corporations

CATSA is wholly owned by the Government of Canada and is under common control with other Government of Canada departments, agencies and Crown corporations. CATSA enters into transactions with these entities in the normal course of operations. These related party transactions are based on normal trade terms applicable to all individuals and corporations.

CATSA’s primary source of funding is parliamentary appropriations received from the Government of Canada, as disclosed in note 10. Parliamentary appropriations receivable are included in trade and other receivables and disclosed in note 4.

Key management personnel

As at March 31, 2026, key management personnel of CATSA are composed of 11 (2025 – 11) Board members and 6 (2025 – 6) members of the senior management team.

The compensation of Board members and other members of key management is as follows for the years ended:

Other than the above compensation, there were no other related party transactions involving key management personnel and their close family members for the years ended March 31, 2026, or 2025.

Transactions with CATSA’s post-employment benefit plans

Transactions with the RPP, SRP and ODBP are conducted in the normal course of business. The transactions with CATSA’s post-employment benefit plans consist of contributions as determined by actuarial valuations, as disclosed in note 8. There were no other transactions during the years ended March 31, 2026, or 2025.

15. Capital management

As a federal Crown corporation, CATSA is subject to the FAA which, in general, restricts it from borrowing money. CATSA relies upon appropriations from Parliament to support its financial obligations and strategic requirements.

The primary objective in managing capital is to provide sufficient liquidity to support CATSA’s financial obligations and its operating and strategic plans. CATSA manages its capital in accordance with relevant Treasury Board of Canada Secretariat directives, in that appropriated funds are drawn from the Consolidated Revenue Fund for the purpose of meeting short-term funding requirements. CATSA’s objectives, policies and processes for managing capital remain unchanged from March 31, 2025.

CATSA’s capital is comprised of cash, trade and other receivables, trade and other payables, current holdbacks, and current lease liabilities. CATSA is not subject to externally imposed capital requirements.

16. Supplementary cash flow information

The following table presents the net change in working capital balances for the years ended:

¹ The change in trade and other receivables excludes an amount of $4,832 (2025 – $3,782) in relation to government funding for capital expenditures, as the amount relates to investing activities.

² The change in inventories excludes a net write down of $657 (net write up 2025 – $892). The amount is included as part of other non-cash transactions on the Statement of Cash Flows.

³ The change in trade and other payables excludes an amount of $6,517 (2025 – $19,515) in relation to the acquisition of property and equipment and intangible assets, as the amount relates to investing activities.

⁴ The change in Deferred Revenue – other screening services excludes an amount of $690 (2025 – $4,494) in relation to the acquisition of property and equipment, as the amount relates to investing activities.