3. Summary of significant accounting policies (continued)
c. Revenue (continued)
3) Other revenue (continued)
Natural gas liquid sales Natural gas liquids sales contracts provide revenue for the Corporation through the sales of gas processing byproducts separated at specific natural gas processing facilities. The method of revenue recognition is an output method based on the type and volume of natural gas liquid transferred to the customer. The sale of processed gas liquids is a single performance obligation recognized over time as the natural gas liquids are sold, which is separate from the actual processing of the gas. These services are generally invoiced in the month following when the sales occur. The Corporation sold its natural gas processing facilities in the prior fiscal year, therefore natural gas liquid sales are no longer collected from customers.
Government grants
Government grants are recognized at fair value as deferred revenue when the Corporation meets the criteria specified in the grant and the grant is deemed receivable from the government entity. Grants relating to expenses are recognized in net income on a systematic basis in the same periods the expenses are incurred. Grants relating to the Corporation’s assets are recognized into net income on a straight line basis over the useful life of the related asset.
There was no change in policy for revenue recognition of government grants as a result of the implementation of IFRS 15.
4) Unbilled revenue
Unbilled revenue is estimated monthly for services provided but not yet billed using management’s judgments and assumptions.
5) Customer contributions
The Corporation builds customer requested distribution and transmission facilities and the title, risks, and rewards of these facilities remain with the Corporation at all times during and after construction, as permitted by The SaskEnergy Act. Any use or benefit that the customer obtains does not occur during the construction period, but thereafter when the connection is made to the customer’s property. It is at that point that the customer may use and benefit from the readily available natural gas. Therefore, the performance obligation is satisfied at the point in time when the customer specific facility connection is available for use by the Corporation and the service lines are available for the customer’s operations. Customer contributions received in advance of construction are initially recorded as a contract liability as they are generally paid at contract inception prior to construction commencing. When the construction of a customer connection reaches its in-service date, the customer contribution paid by the customer is removed from contract liabilities and is generally recognized into customer contribution revenue. There are cases when a refund is paid to the customer based on the customer contribution billed in advance exceeding actual construction costs. The transaction prices included in the contract with the customer are allocated to performance obligations based on the specific customer facility requests being made available for use. Customer contribution consideration is considered variable due to refunds issued to customers. Distribution service customer contributions With respect to distribution customer specific facilities, customers agree to pay, to the Corporation, the sum detailed in the contract with regard to the capital cost of assets which provide distribution services to the contributing customer. The contracts generally require the customer to pay all or a portion of the contract cost in advance of construction, in which case the Corporation records the deposit as contract liabilities until the point in time that the related assets are available for use. At this point, the Corporation reduces the contract liability and records customer contribution revenue. For some contract types, the Corporation may refund to a customer, a portion of the contributions depending on the volume of gas the customer consumes over a five year period of time. The potential refund amount is removed from the contract liability and reported as a refund liability. At the in-service date, the difference between the customer capital contribution revenue recognized and the associated amount cumulatively billed to the customer is recognized as an account receivable. The account receivable is then recognized as a reduction of revenue over the term of the delivery service contract.
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2019-20 FIRST QUARTER REPORT
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