Price Risk Management In 2002, the Company adopted
accrual accounting for energy trading contracts in its continuing operations,
changing from its previous policy of mark-to-market accounting for these
contracts. This accounting change has been applied retroactively with
restatement of prior periods. This change eliminates unrealized gains and losses
on energy trading contracts recognized under mark-to-market accounting. The
cumulative effect of this accounting change as at January 1, 2000 was nil. The
impact of this change on net income for the years ended December 31, 2001 and
December 31, 2000 was an increase of $11 million ($0.02 per share) and a
decrease of $20 million ($0.04 per share), respectively, which is reflected in
the Power segment. Under accrual accounting, net income for the year ended
December 31, 2002 is $13 million ($0.03 per share) higher than would have been
reported under mark-to-market accounting.
Foreign Currency Translation In 2002, the Company
adopted the amendment to the Canadian Institute of Chartered Accountants (CICA) Handbook Section
"Foreign Currency Translation". This amendment eliminates the deferral and amortization of unrealized
translation gains and losses on foreign currency denominated monetary items that
have a fixed or ascertainable life extending beyond the end of the fiscal year
following the current reporting period. This accounting change was applied
retroactively with restatement of prior periods. The cumulative effect of this
accounting change as at January 1, 2000 was an increase of $3 million in
retained earnings. The impact of this change on net income for the years ended
December 31, 2001 and December 31, 2000 was an increase of $5 million ($0.01 per
share) and a decrease of $2 million ($0.01 per share), respectively, which is
reflected in the Corporate segment. This change had no impact on net income for
the year ended December 31, 2002.
Stock-Based Compensation In 2002, the Company
adopted the new standard of the CICA Handbook Section "Stock-Based Compensation
and Other Stock-Based Payments". This section establishes standards for the
recognition, measurement and disclosure of stock-based compensation and other
stock-based payments made in exchange for goods and services. It applies to
transactions in which an enterprise grants shares of common stock, stock
options, or other equity instruments, or incurs liabilities based on the price
of common stock or other equity instruments. This standard allows companies to
either expense, over the vesting period, the fair value of the stock options
granted or to disclose this impact. This new standard has been applied
prospectively.
The Company has chosen to expense stock options and the
impact of this accounting change, which has been recorded in 2002, results in a $2 million charge to
net income. This charge is reflected in the Transmission and Power segments. The
Company used the Black-Scholes model for this calculation with the weighted average assumptions being 5 years of expected life, 4.7
per cent interest rate, 18 per cent volatility and 4.7 per cent dividend
yield.
The impacts of the accounting changes on the
Consolidated Balance Sheet, Consolidated Statement of Income and Consolidated
Statement of Cash Flows as at and for the years ended December 31, 2001 and
December 31, 2000, respectively, are as follows.
Increase/(Decrease) |
 |
|
|
|
|
| |
|
2001 |
|
2000 |
|
|
|
|
|
(millions of dollars)
|
|
|
|
|
Consolidated Balance Sheet |
|
|
|
|
Energy trading assets |
|
|
|
|
Current asset |
|
(152) |
|
(582) |
Long-term asset |
|
(365) |
|
(379) |
Other assets |
|
322 |
|
215 |
Future income tax asset |
|
– |
|
15 |
Total assets |
|
(195) |
|
(731) |
Energy trading liabilities |
|
|
|
|
Current liability |
|
(72) |
|
(542) |
Long-term liability |
|
(112) |
|
(170) |
Future income tax liability |
|
(8) |
|
– |
Total liabilities |
|
(192) |
|
(712) |
Retained earnings |
|
(3) |
|
(19) |
| |
|
|
|
|
Consolidated Income |
|
|
|
|
Revenues |
|
26 |
|
(37) |
Operating expenses |
|
9 |
|
– |
Financial charges |
|
(6) |
|
2 |
Income taxes – current and future |
|
7 |
|
(17) |
Net income |
|
16 |
|
(22) |
| |
|
|
|
|
Consolidated Cash Flows |
|
|
|
|
Funds generated from continuing operations |
|
110 |
|
212 |
Net cash used in investing activities |
|
(110) |
|
(212) |
|
|
|
|
|
|
