SaskEnergy First Quarter Report - June 30, 2017

2. Basis of preparation (continued)

Information about critical judgments in applying accounting policies that have a significant effect on the amounts recognized in the condensed consolidated financial statements include:

Revenue recognition related to unbilled revenue Existence of decommissioning liabilities Identification of own-use derivative contracts

Information about significant management estimates and assumptions that have a risk of resulting in a significant adjustment within the next financial period include:

Estimated unbilled revenue Net realizable value of natural gas in storage held for resale Fair value of financial and derivative instruments Useful lives and amortization rates for intangible assets Useful lives and depreciation rates for property, plant, and equipment Recoverable amounts of non-financial assets

Estimated unearned customer capital contributions Estimated future cost of decommissioning liabilities

3. Summary of significant accounting policies

The accounting policies, as detailed in Note 3 to the consolidated financial statements for the year ended March 31, 2017, have been applied consistently, by the Corporation and its subsidiaries, to all periods presented in these condensed consolidated financial statements, with the exception of the change in accounting policy identified below.

a. Change in accounting policy

Effective April 1, 2017, the Corporation early adopted IFRS 9 Financial Instruments on a retrospective basis. As a result of the adoption of IFRS 9, the Corporation also adopted consequential amendments to IFRS 7 Financial Instruments: Disclosures. These amendments were applied to 2017-18 disclosures but have generally not been applied to comparative information. The key changes as a result of adoption are summarized below.


Classification of financial assets and financial liabilities

IFRS 9 Financial Instruments includes three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). The classification of financial assets under the new standard is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. The standard eliminates the previous IAS 39 Financial Instruments: recognition and measurement categories of held to maturity, loans and receivables and available for sale. The debt retirement funds were classified as FVTPL under IAS 39. The debt retirement funds are administered and managed by the Ministry of Finance. The business model objective is to both hold to collect contractual cash flows and to sell. The contractual terms of the debt retirement funds give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. As a result of the business model in which debt retirement funds are managed, they are now classified as financial assets at FVOCI under IFRS 9.

The adoption of IFRS 9 has not had a significant effect on the Corporation’s accounting policies for financial liabilities.


Impairment of financial assets

IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with an ‘expected credit loss’ (ECL) model. The expected credit loss model requires the Corporation to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. The new impairment model applies to financial assets measured at amortized cost and debt instruments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognized earlier than under IAS 39. IFRS 9 also provides a simplified approach for measuring the loss allowance at an amount equal to lifetime ECL for trade receivables in certain circumstances.



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