NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
IFRS 16 is effective for years beginning on or after January 1, 2019 and may be applied retrospectively or using a modified retrospective approach. The Corporation elected to use the modified retrospective approach, which does not require restatement of prior period financial information as the cumulative effect of applying the standard to prior periods is recorded as an adjustment to opening retained earnings. On initial adoption, the Corporation has elected to use the following practical expedients permitted under the standard: • Utilize a single discount rate for a portfolio of leases with similar characteristics; • Account for leases with a remaining term of less than 12 months as at April 1, 2019 as short-term leases; • Account for lease payments as an expense and not recognize a right-of-use (ROU) asset if the underlying asset is of low dollar value; • The use of hindsight in determining the lease term where the contract contains terms to extend or terminate the lease; and • Use the Corporation’s previous assessment under IAS 37 Provisions, Contingent Liabilities and Contingent Assets For lessees, IFRS 16 removes the classification of leases as either operating leases or finance leases, effectively treating all leases as finance leases. Certain short-term leases (less than 12 months) and leases of low-value assets may be relieved from recognition requirements, and may continue to be treated as operating leases. Lessors will continue with a dual lease classification model. Classification will determine how and when a lessor will recognize lease revenue, and what assets would be recorded. The Corporation holds one lease from the lessor perspective, which is classified as a low-value lease. On implementation of IFRS 16, the Corporation will recognize lease liabilities in relation to leases under the principles of the new standard measured at the present value of the remaining lease payments, discounted using the interest rate implicit in the lease or the Corporation’s incremental borrowing rate as at April 1, 2019. The associated ROU assets will be measured at the amount equal to the lease liability on April 1, 2019. Adoption of the new standard will result in the recognition of additional lease liabilities and ROU assets of approximately $7 million and $16 million, respectively. The Corporation also expects that initial adoption of IFRS 16 will result in a decrease in operating expenses, offset by a corresponding increase in finance costs and depreciation expense. c. Change in accounting policy IFRS 15, Revenue from Contracts with Customers , is effective for annual periods beginning on or after January 1, 2018. SaskEnergy adopted IFRS 15 with a date of initial application of April 1, 2018. The Corporation implemented IFRS 15 using the cumulative effect method, where the cumulative effect of initially applying IFRS 15 would be recorded as an adjustment recognized in the opening balance of retained earnings as at April 1, 2018 Comparative information has not been restated and continues to be reported under previous accounting standards, IAS 11, Construction Contracts and IAS 18, Revenue . The Corporation elected the following practical expedients in adopting IFRS 15: • Apply the standard retrospectively only to contracts that are incomplete at the date of initial application. • Recognize revenue from contracts where the right to consideration from a customer corresponds directly with the value to the customer of the Corporation’s performance completed to date in the amount to which the Corporation has the right to invoice. • Did not adjust the amount of consideration for the effects of a significant financing component if the Corporation expected, at the contract inception, that the period between when the Corporation transfers the good or service to the customer and when the customer pays for the service will be one year or less. • Apply the standard to a portfolio of contracts. Specific contract types were assessed to determine if the portfolio method was most appropriate. The new standard only affects contracts with customers and does not apply to insurance contracts, financial instruments or lease contracts, which fall in the scope of other international financial reporting standards.
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