Notes to the Consolidated Financial Statements
64
For customer‑specific transmission system facility requests, short‑term Firm and Interruptible transportation services may qualify for a deferred investment during the first five years of operation. Deferred investment arises when the Corporation receives partial economic benefit from the incremental facilities added to the natural gas transmission system. An investment calculation is performed at the in‑service date of the facility. From this date, the transmission customer may commence gas flow and may earn refunds over the applicable refund period. Amounts that are potentially refundable to the customer are retained as contract liabilities and are reviewed annually. The TransGas Comprehensive Tariff differentiates Firm and Interruptible transportation services for purposes of determining investment levels and refund eligibility. Under the tariff, refund assessments are based on service specific measures of utilization—contract demand for Firm service and actual transported volumes for Interruptible service— evaluated over the applicable refund period. Amounts that remain potentially refundable are deferred as contract liabilities and reduced as refunds are earned and paid; amounts not earned under the tariff and contract terms are recognized as customer capital contribution revenue when refund eligibility expires. n. Borrowing costs Borrowing costs that are directly attributable to the acquisition, construction or development of a qualifying asset are added to the cost of that asset, until it is available for use. Qualifying assets are those assets that take substantial time to get ready for their intended use. As the Corporation borrows funds generally and uses them for the purpose of obtaining a qualifying asset, the borrowing costs are capitalized by applying its weighted average cost of debt. All other borrowing costs are recognized in finance expense in the period in which they are incurred. o. Lease liability and right-of-use assets A contract is or contains a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. The Corporation has assessed its arrangements to determine whether they contain a lease. Right-of-use assets are initially measured at an amount equal to the lease liability and are adjusted for any payments made at or before the commencement date, less any lease incentives received. Right-of-use assets are depreciated at a rate of 10.0 to 100.0 per cent annually over the related lease term. The Corporation has applied judgment to determine the lease term for contracts that include renewal options. The assessment of whether the Corporation is reasonably certain to exercise such options impacts the lease term, which affects the amount of lease liabilities and right-of-use assets recognized. The corresponding lease liability is measured at the present value of the lease payments that are not paid at commencement and are discounted using the Corporation’s incremental borrowing rate or the rate implicit in the lease. Each lease payment is allocated between the liability and interest so as to achieve a constant rate on the finance balance outstanding. The interest component is included in finance expense. The lease liability is remeasured when there is a change in future lease payments arising from a change in an index or rate, or if there is a change in the Corporation’s estimate or assessment of whether it will exercise an extension, termination or purchase option. A corresponding adjustment is made to the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
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