I LAW SocIETY OF THE NORTHWEST TERRIToRIEs Acceptance of

/ -I 1 LAW SocIETY OF THE NORTHWEST TERRIToRIEs Tab7 Acceptance of the 2007 Auditor’s Report Law Society of the Northwest Territories Financial Statements December 31, 2007 Law Society of the Northwest Territories Financial Statements December 31, 2007 Page Audftors Report Combined Statement of Operations and Changes in Fund Balance Combined Statement of Financial Position General Fund Statement of Operations Statement of Changes in Fund Balance Statement of Financial Position Assurance Fund Statement of Operations and Changes in Fund Balance Statement of Financial Position Liability Fund Statement of Operations and Changes in Fund Balance Statement of Financial Position Discipline Reserve Fund Statement of Operations and Changes in Fund Balance Statement of Financial Position Notes to Financial Statements 3 4 5 6 7 8 9 10 11 12 13 14 15 2 mackay Auditor& Report To the Members of the Law Society of the Northwest Territories We have audited tne foNowing statements of the Law Society of the Northwest Territories as at December 31 2007 and for the year then ended Combined Statement of Operations and Changes in Fund Balances Combined Statement of Financial Position General Fund Statement of Operations General Fund Statement of Changes in Fund B&ance General Fund Statement of Financial Position Assurance Fund Statement of Operations and Changes in Fund Balance Assurance Fund Statement of Financial Position Liability Fund Statement of Operations and Changes n Fund Balance Liability Fund Statement of Financial Position Discipline Reserve Fund Statement of Operations and Changes in Fund Balance Discipline Reserve Fund Statement of Financial Position These financial statements are the responsibility of the Societys management Our responsibility is to express an opinion on these financial statements based on our audit We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement An audit includes examining on a test basis evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as we’l as evaluating the overall financial statement presentation In our opinion these financial statements present fairly, in all material respects, the financial position of the Society as at December 31 2007 and the results of its operations for the year then ended in accordance with Canadian generally accepted accounting principles. Yellowknife, Northwest Territories April 25, 2008 Chartered Accountants 3 Law Society of the Northwest Territories Combined Statement of Operations and Changes in Fund Balance For the year ended December 31, 2007 2006 Restated Revenue Appilcation and admission fees Canadian La’er Insurance Association rebate Discipline cost recovery Investment income Levies Membership fees Miscellaneous (Note 4) N W.T. Law Foundation grant Restricted appearance fees Unclaimed trust monies $ 22,100 31,080 - $ 67185 145643 280550 22,904 20,002 46,625 2,590 638,679 9,375 117,557 2675 106,338 132921 227.325 22,823 17413 50,800 - 687,227 Expenses Administration Amortization Awards and grants Bar admission course subsidy CanLIl Levy Committees Donations Duesandfees Insurance Lawyer Assistance Program (net of recoveries) Miscellaneous Office, postage and telephone Printing and publications Professional fees Rent Spotaudit Volunteer recognition - 200,493 7,779 20,000 20,172 10,010 141,192 555 13,790 121,805 594 44,248 27,404 5,436 11,838 31,920 14,175 1,730 673,141 189,044 6,599 20,500 17,043 7,000 29.918 789 16,296 122,547 811 32,234 28,574 3,190 11,457 31,920 14,313 1,440 533,675 153,552 1,840,489 - Excess revenue (expenses) Surplus, beginning of year Change in accounting policy (Note 5) Surplus, as restated Surplus, end of year (34,462> 1,963,534 30,508 1,994,041 1,840,489 $ 1,959,579 $ 1,994,041 4 __________________________ ___________________________ Law Society of the Northwest Territories Combined Statement of Financial Position As at December 31, 2007 2006 Restated Assets Current Cash Restricted cash (Note 8) Shortterm investments (Note 9) Accounts receivable and accrued interest Prepaid expenses $ 60851 4,590 680,067 25954 4309 775,771 $ 61,681 Z000 732,717 31016 7,589 835,003 1,185,330 23,119 Restricted investments (Note 10) Furniture and equipment (Note 11) 1,222,623 22,150 $ 2,020,544 Liabilities Current Accounts payable and accrued liabilities 60,964 $ 2,043,452 $ $ 49,410 Surplus General Fund Assurance Fund Liability Fund 51,444 1,420,675 407,871 75,000 4,590 1,959,580 155,034 1,327,074 434,361 75,573 2,000 1,994,042 Discipline Reserve Fund Unclaimed Trust Monies Fund $ 2,020,544 Contingency (Note 13> Approved on behalf of the Executive Committee President Treasurer $ 2,043,452 5 Law Society of the Northwest Territories General Fund Statement of Ooerations For the year ended December 31, Revenue Application and admission fees Investment income Membership fees Miscellaneous (Note 4) NWT. Law Foundation grant Restricted appearance fees 2007 Budget 11,100 2000 268,750 21,283 19,592 34,800 357,525 Expenses Committees Ad Hoc Committee Work Admissions Committee Continuing Legal Education Committee (net of recoveries> Ethics and Practice Committee Executive Committee (net of recoveries> Finance Committee Insurance Committee Rules Committee Social Committee (net of recoveries> 2007 Actual 22,100 4,086 280,550 22,904 20,002 46,625 396,267 2006 Actual 9,375 4,383 227,325 22823 17,413 50,800 332,119 $ $ $ 2,000 500 2,500 250 5,500 100 100 1 000 9,000 20,950 1,756 130 2,511 5,450 - 1821 181 263 353 3,751 53 - - - 13,126 22,973 13,899 20,321 177,740 6,599 20,500 17,043 7,000 789 4,524 - Other Administration Amortization Awards and grants Bar Admission Course subsidy CanLIl Levy Donations Dues and fees FLSC assessments and contributions Lawyer Assistance Program (net of recoveries) Miscellaneous (Note 6) Office, postage and telephone (Note 7) Printing and publications Professional fees - 193,163 - 22,000 19,000 - 193,229 7,779 20,000 20,172 10,010 5,280 - Rent Volunteer recognition 5,594 10,092 1,500 24,683 33,760 6,900 11,000 31,920 2,000 361,612 382,562 594 20,885 27,404 5,436 1 1,240 31,920 1,730 356,234 379,207 $ 17060 $ 811 26,187 26,544 3,190 11,447 31,920 1,440 335,734 356,055 (23,936) Excess revenue (expenses) $ (25,037) 6 Law Society of the Northwest Territories General Fund Statement of Changes in Fund Balance For the year ended December 31 2007 2006 Surplus, beginning of year Transfer to Discipline Reserve Fund Excess revenue (expenses) Surplus, end of year - $ current year (Note 12> 155,034 (120,650) 17,060 S 188166 (9196) (23936) $ 51,444 $ 155034 7 __________________________ _______________ Law Society of the Northwest Territories General Fund Statement of Financial Position As at December 31, Assets Current 2007 2006 Cash Short-term investments Accounts receivable and accrued interest Due from Lability Fund Due from Assurance Fund Prepaid expenses $ 12729 125000 17214 140 2263 4.309 S 18962 111925 24,832 2,106 17,701 7589 183j15 23119 161,655 Furniture and equipment (Note II) 22,150 $ Liabilities Current Accounts payable and accrued liabilitces Due to Discipline Reserve Fund 183,805 $ 206234 $ 60966 71395 132,361 S 49,410 1790 51200 155034 Surplus 51,444 $ 183,805 S 206,234 Approved on behalf of the Executive Committee President Treasurer 8 Law Society of the Northwest Territories Assurance Fund Statement of Operations and Changes in Fund Balance For the year ended December 31, 2007 2006 Restated Revenue Assurance fund levy Dividend income In vestment income $ 67,650 13.301 35.335 116,286 $ 54,750 13654 77,519 145.923 Expenses Account seminar Management fees Professional fees Spot audit - 8510 - 14,175 22,685 1806 11,772 1,015 14,313 28.906 117,017 1210,057 - Excess revenue Surplus, beginning of year Change in accounting pohcy (Note 5) Surplus, as restated Surplus, end of year 93,601 1,296,566 30,508 1,327,074 - $ 1,420,675 S 1,327074 9 __________________________ Law Society of the Northwest Territories Assurance Fund Statement of Financial Position As at December 31 2007 2006 Restated Assets Current Cash Short-term investments (Note 8) Accounts receivable and accrued interest $ 10179 183303 6833 $ 15,851 140,792 2802 200,315 Restricted investments (Note 10) 1,222,623 $ 1,422,93B 159445 1185330 $ 1344,775 Liabilities Current Due to General Fund $ 2,263 1,420,675 S 17,701 Surplus 1,327,074 $ 1,422,938 $ 1,344,775 Approved on behalf of the Executive Committee President Treasurer 10 Law Society of the Northwest Territories Liability Fund Statement of Operations and Changes in Fund Balance For the year ended December 31 2007 2006 Revenue Canadian Lawyers Insurance Assoc!atlon rebate Excess insurance levy Investment income Lability insurance levy S 31.080 6560 12960 71433 ‘122,033 $ 117,557 7107 9,283 71.064 205.011 Expenses Administration Claims administration Excess insurance premiums Law practice management Liability insurance premium Professional fees 6,997 267 6560 19454 115245 - 10.719 585 7107 1.051 115.440 1.015 135.917 69,094 365,267 $ 434.361 148,523 Excess revenue (expenses) Surplus, beginning of year Surplus, end of year (26,490) 434,361 $ 407,871 11 Law Society of the Northwest Territories Liability Fund Statement of Financial Position As at December31, 2007 2006 Assets Current Cash Short-term nvestrnents (Note 8) Accounts receivable and accrued interest $ 34337 371764 1910 $ 24693 410000 1774 $ Liabilities 408,011 $ 436467 Current Due to General Fund $ 140 $ 2,106 Surplus 407,871 434361 $ 436,467 S Contingency (Note 13) Approved on behalf of the Executive Committee President Treasurer 408,011 12 Law Society of the Northwest Territories Discipline Reserve Fund Statement of Operations and Chanoes in Fund Balance For the year ended December 31. , 2007 2006 Revenue Discipline cost recovery Interest income $ - $ 1503 1,503 2,675 1,499 4,174 Expenses Counsel Inquiry Miscellaneous Professional 5,767 112,452 3,909 598 122,726 3,344 6,253 3190 10 12797 (8,623) 75,000 Excess expenses Surplus, beginning of year Transfer from General Fund (Note 12) Surplus, end of year (121,223) 75,573 120,650 9196 $ 75573 $ 75,000 13 ___________________________ Law Society of the Northwest Territories Discipline Reserve Fund Statement of Financial Position As at December 31, 2007 2006 Assets Current Cash Shortterm investments Accrued interest $ 3.605 - S - 2,174 70000 1,609 Due from Genera’ Fund 71 395 1 790 S 75.573 $ Surplus 75,000 $ 75,000 $ 75,573 Approved on behalf of the Executive Committee President Treasurer 14 Law Society of the Northwest Territories Notes to Financial Statements December 31, 2007 1. Nature of Operations The Law Society of the Northwest Territories (‘Society”) is the governing body for the legai profession in the Northwest Territories. The Society was established by, and operates pursuant to, the Legal Profession Act of the Northwest Territories. The Society is a non-profit organization, and accordingly is exempt from income taxes under Section 149(1)(l) of the Income Tax Act. 2. Accounting Changes Effective January 1. 2007, the Society implemented the new CICA Handbook Section 1506 accounting changes. Under these new recommendations, voluntary changes in accounting policy are permitted only when they result in the financial statements providing reliable and more relevant information. This section requires changes in accounting policy to be applied retrospectively unless doing so is impracticable, requires prior period errors to be corrected retrospectively and requires enhanced disclosures about the effects of change in accounting policies, estimates and error on the financial statements. These recommendations also require the disclosure of new primary sources of generally accepted accounting principles that have been issued that the Society has not adopted because they are not yet in effect, The impact the adoption of this Section will have on the Society’s financial statements will depend on the nature of future accounting changes. General standards for financial statement presentation The CICA has amended Handbook Section 1400 General standards of financial presentation” effective for periods beginning on or after January 1, 2008 to include requirements to assess and disclose the Society’s ability to continue as a going concern. The adoption of this new section is not expected to have an impact on the Society’s financial statements. Capital disclosures In December 2006, the CICA issued Handbook section 1535 “Capital disclosures which is effective for years beginning on or after October 1, 2007. The section specifies the disclosure of (i) an entity’s objectives, policies, and processes for managing capital; (ii) quantitative data about what the entity regards as capital: (iii) whether the entity has complied with any capital requirements: and (iv) if it has not complied, the consequences of such non-compliance. This new Section relates to disclosures and did not have an impact on the Society’s financial results. International financial reporting standards In January 2006, the CICA Accounting Standards Board (AcSB) adopted a strategic plan for the direction of accounting standards in Canada. As part of that plan, accounting standards in Canada for public companies are expected to converge with International Financial Reporting Standards (‘IFRS”) by the end of 2011. The impact of the transition to IFRS on the Society’s financial statements has not yet been determined. 15 Law Society of the Northwest Territories Notes to Financial Statements December 31. 2007 3. Significant Accounting Policies The following are the significant accounting policies used by management in the preparation of these financial statements. (a) Financial instruments - recognition and measurement Section 3855 requires that all financial assets and financial liabilities be measured at fair value on initial recognition except for certain related party transactions. Measurement in subsequent periods depends on whether the financial asset or liability has been classified as held-for-trading. available-for-sale, held-to-maturity, loans and receivables or other liabilities. Financial instruments classified as held-for-trading are subsequently measured at fair value and unrealized gains and losses are included in net income in the period in which they arise. The Society classifies cash and restricted cash. short-term investments and restricted investments as held-fortrading. Available-for-sale assets are those non-derivative financial assets that are designated as available-forsale or are not classified as held-for-trading, held-to-maturity, or loans and receivables. Available-forsale assets are subsequently measured at fair value with unrealized gains and losses recorded in other comprehensive income until realized, at which time they will be recognized in net income. The Society does not classify any financial instruments as available-for-sale. Held to maturity assets are those non-derivative financial assets with fixed or determinable payments and fixed maturity that the company has an intention and ability to hold until maturity, excluding those assets that have been classified as held-for-trading, available-for-sale, or loans and receivables. They are subsequently measured at amortized cost using the effective interest method. The Society does not classify any financial instruments as held to maturity. Financial instruments classified as loans and receivables are non-derivative financial assets resulting from the delivery of cash or other assets by a lender to a borrower in return for a promise to repay on a specified date or dates. or on demand, usually with interest. These assets do not include debt securities or assets classified as held-for-trading. They are subsequently measured at amortized cost using the effective interest method. The Society classifies accounts receivables and accrued interest as loans and receivables. All other financial liabilities that are not classified as held-for-trading are subsequently measured at cost or amortized cost. (b) Financial instruments - disclosure and presentation Section 3861 establishes standards for presentation of financial instruments and non-financial derivatives and identifies the information that should be disclosed about them. Under the new standards, policies followed for periods prior to the effective dated generally are not reversed and therefore, the comparative figures have not been restated. 16 Law Society of the Northwest Territories Notes to Financial Statements December 31, 2007 3. Significant Accounting Policies (continued) (c) Furniture and equipment Furniture and equipment are recorded at cost. Amortization is calculated by the declining balance and straight line methods at the annual rates set out in note 11 (d) Short-term investments Shortterm investments are valued at the lower of cost and market value. At December 31, 2007, cost approximated market value. (e) Restricted investments Restricted investments are valued at the lower of cost and market value, (f) Revenue recognition Revenue from membership fees is recognized when received or receivable. Membership fees are due on March 31, 2007, for the membership year April 1, 2007, to March 31, 2008. Investment income is recognized when the income is earned, All other revenue such as levies, appearance fees, and grants are recognized when received or receivable the amount receivable can be reasonably estimated and its collection is reasonably assured. (g) Professional liability insurance levy The levy and premium expense for insurance coverage for the policy year July 1, 2007 to June 30. 2008 is recorded in the 2007 fiscal year. (h) Fund accounting The Society follows the restricted fund method of accounting for contributions. The General Fund accounts for the Societys program delivery and administrative activities. This fund reports unrestricted resources and restricted operating grants. The Assurance Fund reports only restricted funds to be used in conjunction with any defalcation claims which may be made against a member and expenses related to the assurance of compliance. The Liability Fund reports only restricted funds to be used in conjunction with member liability insurance in relation to error or omission liability. The Discipline Reserve Fund reports only restricted funds to be used in conjunction with any complaints made against a member and expenses related to the investigations, resolution and decision of the complaint. The Unclaimed Trust Monies Fund reports only restricted funds held by the Society until claimed by one or more persons who are so entitled. Funds are transferred between the General Fund and the other funds as necessary. (i) Contributed services Volunteers contribute a significant number of hours to the Society in carrying out its service delivery 17 Law Society of the Northwest Territories Notes to Financial Statements December 31, 2007 not activities. Because of the difficulty of determining their fair value, contributed services are recognized in the financial statements. 3. Significant Accounting Policies (continued) (j) Budget Budgets are not audited. and are prepared only for the General Fund. (k) Statement of cash flows A statement of cash flows is not provided as, in the opinion of management, it would not provide any additional meaningful information. (I) Use of estimates The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses during the period. Actual results could differ from those estimates. 4. Miscellaneous Revenue (General Fund) Canadian Bar Association administration contract Certificates of standing Change of status fees Liability fund administration fee Reinstatement fees 2007 2006 $ 9,600 1,400 800 10,273 750 22,823 $ 10,800 2.325 1000 6279 2,500 22,904 $ $ 5. Change in Accounting Policy The Society retroactively adopted the financial instruments recognition and measurement policy described in Note 3. The section applies to financial statements for fiscal periods beginning on or after October 1, 2006 and was adopted by the Society on January 1. 2007. Previously, restricted investments were recorded at their carrying value, measured as the lower of book or market value. Under the new policy, restricted investments have been recognized at their fair value. The effect of this change was to increase the value of the restricted investments and the surplus by $30,508 in 1996. In the current year the restricted nvestments value were decreased by $8593 and a loss was recognized on the restricted investments. - 18 _____ Law Society of the Northwest Territories Notes to Financial Statements December 31, 2007 6. Miscellaneous Expense (General Fund) AGM expenses Federation activities Janitorial Miscellaneous Staff training 2007 2006 $ 4889 10863 168 4844 121 $ 5986 13209 216 5615 1,161 26187 $ 20,885 S 7, Office, postage and telephone (General Fund) Equipment rental Internet Office equipment Office supplies Postage Sundry Telephone and fax $ 2007 8,740 2191 349 1,673 2272 8,401 3,778 $ 2006 8,975 1085 2376 2184 1,424 7075 3,425 26,544 $ 27,404 $ 8. Restricted Cash Restricted cash consists of unclaimed trust monies held by the Society. Legislation provides lawyers the option to forward money held in trust that has not been claimed to the Society to be held in trust until the amount is claimed or settled by legislative process, in accordance with policy. 9. Short-term Investments Guaranteed Investment Certificates RBC Cash Account 2007 2006 $ 718,190 14,527 732,717 $ $ 671.764 8303 680,067 $ The guaranteed investment certificates include separate investments of $125000 (General Fund), 3,600/c, and 3.40% $175,000 (Assurance Fund), and $371,764 (Liability Fund) which earn interest at 3,20%, 2008, July 14, 2008, and December 16, 2008, per annum, respectively, and mature on April 28, respectively. 19 Law Society of the Northwest Territories Notes to Financial Statements December 31 2007 10. Restricted Investments The table below presents the fair value of the Society’s restricted nvestmerts as at December 31. 2007 together with the change in fair value from their cost base. The fair value of the Society’s investments were determined by reference to published price quotations in an active market. 2007 Market Value Bonds 6.00% 560% 600% 3.55% 4.00% 425% 6.25% 2007 Book Value 4.00% 5,50% 4.00% 610% 575% 3.75% 3.75% 4.20% 375% 4.00% 4.50% Government of Canada, due June 1 2008 Ontario Hydro. due June 2. 2008 Province of British Columbia. due June 9. 2008 Canada Housing Trust No. 1, due March 15, 2009 Province of Ontario, due May 19, 2009 Government of Canada, due September 1, 2009 Province of British Columbia, December 1. 2009 Canada Mortgage & Housing Corp., due December 1,2009 Government of Canada, due June 1,2010 Government of Canada. due September 1.2010 Province of Ontario, due November 19, 2010 Export Development Corp, due June 1.2011 Farm Credit Canada, due June 15, 2011 Government of Canada, due September 1,2011 Farm Credit Canada, due February 15. 2012 Government of Canada, due June 1, 2012 Farm Credit Canada, due February 15, 2013 Province of Ontario, due March 8, 2015 S 84069 62,647 32370 65,358 66240 32,679 45950 15,046 89,743 5 34,600 31,770 55.015 74,343 46,408 72,340 78856 151.399 183,790 85,673 63.773 31677 65094 66,110 32,056 43,506 15,416 85,028 33,887 30,761 52,454 73,770 44,816 70,663 77,779 148,536 179,711 $ 1,222,623 $ 1.200,710 20 Law Society of the Northwest Territories Notes to Financial Statements December 31 2007 10. Restricted Investments (continued) 2006 Market Value Bonds 4.75% 450% 530% 6.00% 5.60% 6.00% 3.55% 400% 4.25% 6.25% 4.00% 5.50% 6,10% 5.75% 3.75% 3.75% 2006 Book Value Canada Housing Trust, due March 15. 2007 Government of Canada. due September 1 2007 Canada Mortgage & Housing Corp. due December 3. 2007 Government of Canada. due June 1 2008 Ontario Hydro, due June 2. 2008 Province of British Columbia, due June 9, 2008 Canada Housing Trust No. 1, due March 15, 2009 Province of Ontario, due May 19, 2009 Government of Canada. due September 1 2009 Province of British Columbia. due December 1 2009 Canada Mortgage & Housing Corp., due December 1, 2009 Government of Canada. due June 1, 2010 Province of Ontario, due November 19, 2010 Export Development Corp. due June 1 2011 Farm Credit Canada, due June 15, 2011 Government of Canada, due September 1, 2011 $ 44,649 49,822 17,244 85,559 63,460 32,915 64 918 66.118 32 643 46 761 15,010 90,468 32 295 55,671 74,433 46,098 $ 43,365 50,969 17052 85.673 63,773 31,677 65,094 66,110 32.056 43.506 15,416 85,028 30.761 52,454 73,770 44,816 Mutual Funds RBC Private Corporate Bond Pool 367,266 353,303 $ 1,154,823 $ 1,185,330 Investment funds are carried at fair market value together with the accrued interest earned. Unrealized losses of $8,596 (1996 gain of S30,508) have been recognized in investment income. - The following table presents the remaining terms to maturity at fair value, along with the average effective yields for each maturity for securities investments exposed to interest rate risk as at December 31, 2007. Within 1 yr Securities Effective yields $ 179,087 2.909% $ 1-5yrs 859.746 3.662% $ Oversyrs 183790 4.153% Total 2007 $ 1,222,623 3.626% $ Total 2006 818.064 3.366 % 21 Law Society of the Northwest Territories Notes to Financial Statements December 31, 2007 11.Furniture and Equipment 2007 Rate Furniture and equipment Computer equipment Leasehold improvements Software 20% 30% 1/10 SL 100% Cost Accumulated Amortization Net Book Value $ 6,896 2,474 12143 637 $ 2006 Net Book Value 8621 3,697 10801 - $ 51,220 12798 20939 3004 87,961 $ 44,324 10324 8,796 2,367 $ 65,811 $ $ 2215O $ 23,119 12.Discipline Reserve Transfer (Due From General Fund) At year-end the Discipline Fund had a cash balance of S3,605 and a due to the General Fund of $49,255. A transfer of $120,650 was made at year-end from the General Fund to the Discipline Fund in order to bring the closing balance in the Discipline Fund up to the required amount of $75,000. The net affect of this transfer is shown in the financial statements. I 3.Contingency The Canadian Lawyers Insurance Association is a reciprocal insurance exchange established to provide professional liability insurance for the legal profession. There have been retroassessment calls to subscribing law societies of $2,000,000 as at December 31, 1991, and $1,000,000 as at December 31, 1992. The Society’s share of these retroassessments has been recorded in previous financial statements. The likelihood of a retroassessment call for other years is unknown. There are currently ongoing litigations, the costs of which cannot be estimated at this time. The related costs will be recorded in the period in which the expenses are incurred. I4.FnanciaI instruments The following sections describe the Society’s financial risk management objectives and policies and the Society’s financial risk exposures. The Society does not have formalized financial risk management objectives and policies (a) Credit risk Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Society is exposed to credit risk from its members. 22