3. Summary of significant accounting policies (continued) The Corporation is continuing to review the new standards and has completed a preliminary assessment of the impact on its consolidated financial statements for IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers . The anticipated impacts are as follows: IFRS 9 Financial Instruments – under the new financial asset classifications, the Corporation’s debt retirement funds may qualify to 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 not yet determined the impact of the new standard to customer capital contribution revenue. Changes to the recognition of customer capital contribution revenue are contingent on the Corporation’s identification of performance obligations within the underlying customer contracts. 4. Capital management The Corporation’s objective when managing its capital is to maintain financial stability through the effective management of liquidity and capital structure. The Corporation finances its capital requirements through internally generated funds and injections of capital from the Government of Saskatchewan’s General Revenue Fund, typically in the form of debt. Under The SaskEnergy Act , the Corporation may borrow up to $1,700 million of debt upon approval of the Lieutenant Governor in Council (2014 – $1,700 million). Within this limit, the Corporation may borrow up to $500 million in temporary loans (2014 – $400 million), including a $35 million uncommitted line of credit with Toronto-Dominion Bank (2014 – $35 million). As at March 31, 2016, the Corporation had $1,269 million of debt outstanding (2014 – $1,257 million), including $299 million in temporary loans (2014 – $299 million), leaving $201 million of remaining short-term borrowing capacity (2014 – $101 million). The Corporation borrows all its capital, with the exception of occasional overnight loans from the Toronto-Dominion Bank, from the Government of Saskatchewan’s General Revenue Fund (the Province). The Corporation’s borrowing requirements constitute a minor portion of the Province’s total borrowings, and given the Province’s strong credit rating, the Corporation was able to acquire all its funding requirements during the period. The Corporation monitors capital on the basis of the proportion of debt in the capital structure, with a long-term target range of 58.0% to 63.0%. The purpose of this strategy is to ensure the Corporation’s debt is self-supporting and does not adversely affect the Province’s access to capital markets. The debt ratio was calculated as net debt divided by total capital at the end of the period as follows: March December (millions) 31, 2016 31, 2014 Long-term debt $ 970 $ 958 Short-term debt 299 299 Debt retirement funds (102) (93) Cash (11) (5) Total net debt 1,156 1,159
Equity advances Retained earnings
72
72
623
669
Total capital
$ 1,854
$ 1,897
62.5%
60.9%
63
2015-16 ANNUAL REPORT SASKENERGY
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