Content
Change In Accounting Policies
FINANCIAL INSTRUMENTS, COMPREHENSIVE INCOME AND HEDGING RELATIONSHIPS
Effective January 1, 2007, the Company adopted the Canadian Institute of Chartered Accountants (CICA) Handbook Section 1530 Comprehensive Income, Section 3251 Equity, Section 3855 Financial Instruments – Recognition and Measurement, Section 3861 Financial Instruments – Disclosure and Presentation and Section 3865 Hedges. In accordance with the transitional provisions in these new standards, these policies were adopted prospectively and accordingly, the prior periods were not restated. Prior period unrealized gains and losses related to the Company's foreign currency translation adjustments and net investment hedges are now included in Accumulated Other Comprehensive Income or Loss.
The adoption of the new standards did not impact the Company's earnings or cash flows.
Financial Instruments
CICA Handbook Section 3855 establishes recognition and measurement criteria for financial instruments. The new standard requires that, generally, all financial instruments are recorded at fair value on initial recognition. Subsequent measurement depends on whether the instrument has been classified as "held to maturity", "held for trading", "available for sale" or "loans and receivables" as defined by Section 3855.
With the exception of recognizing derivative instruments, including hedge instruments, at fair value, the valuation of the Company's financial instruments has not changed. The methods by which the Company determines the fair value of its financial instruments have also not changed as a result of adopting this standard.
Impact on Adoption
The adoption of the new standards resulted in the following adjustments on January 1, 2007:
(millions
of dollars) |
Assets |
Liabilities and Equity |
Accounts Receivable and Other1,2 |
5.4 |
- |
Deferred Amounts and Other Assets1,2,3,4 |
55.3 |
- |
Long-Term Investments1 |
(57.3) |
- |
Accounts Payable and Other2 |
- |
57.6 |
Long-Term Debt3 |
- |
(52.7) |
Other Long-Term Liabilities1,2,4 |
- |
42.5 |
Future Income Taxes1 |
- |
(18.9) |
Non-Controlling Interest1 |
- |
(26.3) |
Accumulated Other Comprehensive Income1 |
- |
48.2 |
Retained Earnings1 |
- |
(47.0) |
|
3.4 |
3.4 |
- As a result of the new standards for cash flow hedges, the Company recognized unrealized net gains related to interest rate, foreign exchange and commodity hedges. The Company adjusted both deferred amounts and retained earnings for historical fair value adjustments related to certain cash flow hedges.
- The Company recorded a regulatory liability due to the recognition of fixed price power contracts offset by unrealized financial instrument losses.
- The Company reclassified unamortized deferred financing fees from deferred amounts and other assets to long-term debt as a result of adopting the new standards.
- Relates to the recognition of gas purchase hedges for the regulated gas distribution businesses at January 1, 2007.
FUTURE ACCOUNTING POLICY CHANGES
Capital Disclosures and Financial Instruments – Disclosure and Presentation
Effective January 1, 2008, the Company will adopt new accounting standards for Capital Disclosures (CICA Handbook Section 1535) and Financial Instruments – Disclosure and Presentation (CICA Handbook Sections 3862 and 3863).
Under Section 1535, the Company will disclose its objectives, policies and procedures for managing capital, any summary quantitative data about what the Company manages as capital, whether the Company has complied with any externally imposed capital requirements and, if the Company has not complied with them, any consequences of non-compliance with these capital requirements.
The new Sections 3862 and 3863 replace Section 3861 Financial Instruments – Disclosure and Presentation. Disclosure requirements are revised and enhanced, while presentation requirements remain essentially unchanged. The new disclosure requirements will expand discussion around the significance of financial instruments for the Company's financial position and performance, the nature and extent of risks arising from financial instruments to which the entity is exposed during the period and at the balance sheet date and how the entity manages those risks.
Inventories
The CICA issued Section 3031 Inventories effective January 1, 2008 which aligns accounting for inventories under Canadian GAAP with International Financial Reporting Standards (IFRS). This standard will not materially impact the Company's financial statements.
Rate Regulated Operations
In August 2007, the Canadian Accounting Standards Board (AcSB) published its decision with respect to rate regulated operations. The AcSB decided to retain much of the existing guidance related to rate-regulated operations; however, the exemption from the requirement to record future income taxes, as currently provided in CICA Handbook Section 3465, Income Taxes, and the exemption from CICA Handbook Section 1100, Generally Accepted Accounting Principles, will be removed, effective January 1, 2009. The Company will adopt these changes on January 1, 2009 and the principal effect will be the recognition of future income tax liabilities on the balance sheet, offset equally by regulatory assets.
International Financial Reporting Standards
In 2005, the AcSB announced that accounting standards in Canada are to converge with IFRS. Firms will begin reporting (with comparative data) under IFRS by the first quarter of 2011. While IFRS is based on a conceptual framework similar to Canadian GAAP, there are significant differences with respect to recognition, measurement and disclosures, which the Company is beginning to assess.