3. Summary of significant accounting policies (continued)
c. Revenue
IFRS 15, Revenue from Contracts with Customers , is effective for annual periods beginning on or after January 1, 2018. SaskEnergy adopted IFRS 15 with a date of initial application of April 1, 2018. The Corporation implemented IFRS 15 using the cumulative effect method, where the cumulative effect of initially applying IFRS 15 would be recorded as an adjustment recognized in the opening balance of retained earnings as at April 1, 2018.
The Corporation elected the following practical expedients in adopting IFRS 15:
Apply the standard retrospectively only to contracts that are incomplete at the date of initial application.
Recognize revenue from contracts where the right to consideration from a customer corresponds directly with the value to the customer of the Corporation’s performance completed to date in the amount to which the Corporation has the right to invoice. Did not adjust the amount of consideration for the effects of a significant financing component if the Corporation expected, at the contract inception, that the period between when the Corporation transfers the good or service to the customer and when the customer pays for the service will be one year or less.
Apply the standard to a portfolio of contracts. Specific contract types were assessed to determine if the portfolio method was most appropriate.
The new standard only affects contracts with customers and does not apply to insurance contracts, financial instruments or lease contracts, which fall in the scope of other international financial reporting standards. Disaggregation of revenue recognized, as required by IFRS 15, has been provided in Notes 12 and 13 of these consolidated financial statements. For each performance obligation, the Corporation determines at contract inception whether it satisfies the performance obligation over time or satisfies the performance obligation at a point in time. Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management. SaskEnergy has the exclusive right to distribute natural gas within the province of Saskatchewan. The Corporation may purchase, distribute, sell, manufacture, produce, transport, gather, compress and store natural gas as per The SaskEnergy Act . The Corporation’s natural gas commodity revenue and transportation services are based on the consideration specified in contracts with customers. Revenue is recognized when control of the product is transferred to the customer or transportation service has been completed. This is generally at the point in time when the customer obtains legal title to the natural gas at its custody transfer point or the transportation service has been completed at the customer’s natural gas line location and collection is reasonably assured. The amount of revenue recognized is based on the consideration specified in the contract.
The Corporation’s principle sources of revenues and methods applied to the recognition of these revenues in these financial statements are as follows:
1) Commodity sales and delivery service
Commodity sales Commodity sales contracts with customers generate revenue from the sale of natural gas to customers. Revenue is recognized at a point in time when the Corporation sells natural gas to customers, who consume the natural gas to heat their homes or operate their businesses. Title to natural gas purchased from SaskEnergy, and all related risks remain with SaskEnergy until the gas is transferred at a meter point. At the meter point, the customer takes ownership of the natural gas and the performance obligation is satisfied. The commodity charge is then billable to the customer as there are no further performance obligations outstanding.
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2019-20 FIRST QUARTER REPORT
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