Useful Lives and Depreciation and Amortization Rates for Property, Plant and Equipment and Intangible Assets With a combined carrying amount of $1,961 million, property, plant and equipment and intangible assets constitute a significant component of the Corporation’s assets. As a result, changes in assumptions related to the calculation of depreciation and amortization expense may have a significant impact on SaskEnergy’s net income. As at December 31, 2014, a one-year decrease in the estimated service life of the Corporation’s capital asset base would have increased the Corporation’s depreciation and amortization expense by approximately $2 million. The Corporation’s property, plant and equipment and intangible assets are depreciated/amortized on a straight- line basis over the estimated service life of the asset. The estimated service lives are based on extensive studies with annual reviews for reasonability. Any changes in the estimated service life of assets are treated as prospective adjustments to depreciation and amortization. Estimated Unearned Customer Capital Contributions Customer capital contributions, related to the construction of new, customer-specific service connections, are recognized as deferred revenue until the related property, plant and equipment are available for use. The Corporation’s customer capital contributions, particularly those related to the transmission system, are often subject to refunds over a certain period. Consequently, when the related property, plant and equipment are available for use, an estimate of the potential refund remains in deferred revenue until the refund period has passed. At year end, the Corporation estimated $90 million in customer capital contributions could be refunded in future periods. Estimated Future Costs of Decommissioning Liabilities The Corporation determines its obligations, legal and constructive, for the future costs of decommissioning certain natural gas facilities by estimating both the associated costs and timing of the necessary cash flows. The timing of future decommissioning is conditional upon the Corporation’s anticipated ongoing use for these facilities, while future decommissioning costs are estimated based on the Corporation’s experience and presented on a discounted basis. At year end, the Corporation’s provisions were estimated at $95 million. A 0.5 per cent increase in the discount rates used to determine the provisions would have resulted in a $12 million decrease in provisions at the end of the year. A 0.5 per cent decrease would have resulted in a $15 million increase.
Accounting Policy Changes Several new and amended standards, issued by the International Accounting Standards Board (IASB), became effective January 1, 2014. The impact of the adoption of these standards has been discussed in Note 3 of Corporation’s consolidated financial statements. Adoption of the new and amended standards resulted in no material impact on the Corporation’s consolidated financial statements The IASB has issued several new and amended standards that will become effective in future periods. Details on future changes in accounting policies are provided within Note 3 of the consolidated financial statements. While the Corporation continues to review these standards, the impact on its consolidated financial statements has not yet been determined.
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2014 Annual Report SaskEnergy
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