3. Summary of significant accounting policies (continued)
ii. Level 2
Inputs are other than quoted prices included within Level 1 that are either directly or indirectly observable for the asset or liability as at the reporting date. Level 2 valuations are based on inputs, including quoted market prices, time value, volatility factors and broker quotations which can be substantially observed or corroborated in the marketplace. The fair value of debt retirement funds is determined by Saskatchewan’s Ministry of Finance using a market approach with information provided by investment dealers. To the extent possible, valuations reflect indicative secondary pricing for these securities. In all other circumstances, valuations are determined with reference to similar actively traded instrument. The fair value of natural gas derivative instruments is determined using a market approach. The Corporation obtains quoted market prices from sources such as the New York Mercantile Exchange and the Natural Gas Exchange, independent price publications and over-the-counter broker quotes. The fair value of long-term debt is determined for disclosure purposes only using an income approach. Fair values are estimated using the present value of future cash flows discounted at the market rate of interest for the equivalent Province of Saskatchewan debt instruments.
iii. 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.
c. Future changes in accounting policies
The following new and amended standards are not yet effective and have not been applied in preparing these consolidated financial statements: IFRS 9 Financial Instruments – introduces a logical approach for the classification of financial assets driven by cash flow characteristics and the business model in which an asset is held. The new Standard also replaces the rule-based hedge accounting requirements in IAS 39 Financial Instruments: Recognition and Measurement to more closely align the accounting with risk management activities. This standard is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted. IFRS 15 Revenue from Contracts with Customers – clarifies the principles for recognizing revenue from contracts with customers and will affect the Corporation’s accounting policies with respect to the following applicable revenue Standards and Interpretations upon its effective date:
IAS 18 Revenue IAS 11 Construction Contracts IFRIC 18 Transfer of Assets from Customers
This standard is effective for annual periods beginning on or after January 1, 2018, with early adoption permitted.
The Corporation is continuing to review the new standards and has completed a preliminary assessment of the impact on its consolidated financial statements. The anticipated impacts are as follows: IFRS 9 Financial Instruments – under the new financial asset classifications, the Corporation’s debt retirement funds would be classified as fair value through other comprehensive income. Classification as such would eliminate the recognition of fluctuations in fair value on debt retirement funds in net income, as market value adjustments would be recorded in other comprehensive income. Under the new Standard, the Corporation is also evaluating the implementation of hedge accounting for its commodity price risk management strategy. Implementation of hedge accounting would reduce the volatility of market value adjustments for outstanding commodity purchase contracts on net income, as the effective portion of the designated hedging relationships would be reclassified to other comprehensive income. IFRS 15 Revenue from Contracts with Customers – under the new control-based revenue model, the Corporation anticipates minimal impacts to the majority of its revenue streams, but has identified potential changes to customer capital contribution revenue.
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2015/2016 FOURTH QUARTER REPORT
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