SaskEnergy Third Quarter Report - December 31, 2019

3. Summary of significant accounting policies (continued)

b. Future changes in accounting policy

The following accounting standard changes are effective for periods beginning on or after January 1, 2020:  Revised Conceptual framework  Amendments to IFRS 3 Business combinations definition of a business  Amendments to IAS 1 Presentation of financial statements and IAS 8 Accounting policies

It is expected that these changes will have little to no impact to the condensed consolidated financial statements of the Corporation.

4. Natural gas in storage held for resale

As at December 31, 2019

As at March 31,

2019

(millions)

Cost

$

53

$

40

Revaluation to net realizable value

(11)

(14)

$

42

$

26

The net realizable value of natural gas in storage at the end of the quarter was $11 million below cost (March 31, 2019 - $14 million below cost). As at December 31, 2019, the Corporation expects that $38 million of the current inventory value could be sold or consumed within the next fiscal year and $4 million of the current inventory value could be sold or consumed after more than one fiscal year.

5. Financial and derivative instruments

For recurring and non-recurring fair value measurements, the Corporation estimates the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the reporting date under current market conditions. This requires the Corporation to make certain assumptions, including the principal (or most advantageous) market, the most appropriate valuation technique and the most appropriate valuation premise. The Corporation’s own credit risk and the credit risk of the counterparty have been taken into account in determining the fair value of financial assets and liabilities, including derivative instruments.

In measuring fair value, the Corporation classifies items according to the fair value hierarchy based on the amount of observable inputs.

Level 1 valuations use quoted prices (unadjusted) that are available in active markets for identical assets or liabilities as at the reporting date. Active markets are those in which transactions occur in sufficient frequency and volume to provide ongoing pricing information. Level 2 valuations are based on inputs that are either directly or indirectly observable for the asset or liability as at the reporting date. Inputs include quoted market prices, time value, volatility factors and broker quotations which can be substantially observed or corroborated in the marketplace.

Level 3 inputs are unobservable for the particular assets and liabilities as at the reporting date. The Corporation did not classify any of its fair value measurements within Level 3.

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2019-20 THIRD QUARTER REPORT

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