3. Summary of significant accounting policies (continued)
The fair value of natural gas derivative instruments is determined using a market approach. The Corporation obtains quoted market prices from sources such as the New York Mercantile Exchange and the Natural Gas Exchange, independent price publications and over-the-counter broker quotes. The fair value of long-term debt is determined for disclosure purposes only using an income approach. Fair values are estimated using the present value of future cash flows discounted at the market rate of interest for the equivalent Province of Saskatchewan debt instruments.
iii. Level 3
Inputs are unobservable for the particular assets and liabilities as at the reporting date. The Corporation did not classify any of its fair value measurements within Level 3.
c. Future changes in accounting policies
The following new and amended standards are not yet effective and have not been applied in preparing these consolidated financial statements:
IFRS 9 Financial Instruments – replaces the rule-based hedge accounting requirements in IAS 39 Financial Instruments: Recognition and Measurement to more closely align the accounting with risk management activities. This Standard is effective for annual periods beginning on or after January 1, 2018. IFRS 15 Revenue from Contracts with Customers – clarifies the principles for recognizing revenue from contracts with customers and will affect the Corporation’s accounting policies with respect to the following applicable revenue standards and Interpretations upon its effective date:
IAS 18 Revenue IAS 11 Construction Contracts IFRIC 18 Transfer of Assets from Customers
This standard was effective for annual periods beginning on or after January 1, 2017; however; on July 22, 2015 the IASB confirmed the one-year deferral of the effective date. The formal amendment to the standard, specifying the January 1, 2018 effective date, is expected to be issued in September.
The Corporation is continuing to review the new and amended standards and has not yet determined the impact on its condensed consolidated financial statements.
4. Natural gas in storage held for resale
As at June 30, 2015
As at December 31, 2014
(millions)
Cost
$
135
$
163
Revaluation to net realizable value
(22)
(23)
$
113
$
140
With the decline in natural gas market prices over recent years, the net realizable value of natural gas in storage at the end of the quarter was $22 million below cost (December 31, 2014 - $23 million below cost). As at June 30, 2015, the Corporation expected that $71 million of the current inventory value would be sold or consumed within the next year, and $42 million of the current inventory value would be sold or consumed after more than one year.
19
2015 SECOND QUARTER REPORT
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