Husky Energy Inc. (2011)
Notes to the Consolidated Financial Statements [extract]
Note 26 First-Time Adoption of International Financial Reporting Standards
Key First-Time Adoption Exemptions Applied [extract]
IFRS 1, “First-Time Adoption of International Financial Reporting Standards,” allows first-time adopters certain exemptions from retrospective application of certain IFRSs.
The Company applied the following exemptions: [extract]
IFRS 3, “Business Combinations,” was not applied to acquisitions of subsidiaries or interests in joint ventures that occurred before January 1, 2010.
i) IFRS 3 Adjustments – Business Combinations [extract]
Given that the Company elected to apply the IFRS 1 exemption which permits no adjustments to amounts recorded for acquisitions that occurred prior to January 1, 2010, no retrospective adjustments were required. The Company acquired the remaining interest in the Lloydminster Upgrader from the Government of Alberta in 1995 and is required to make payments to Natural Resources Canada and Alberta Department of Energy from 1995 to 2014 based on average differentials between heavy crude oil feedstock and the price of synthetic crude oil sales. Under IFRS, the Company is required to recognize this contingent consideration at its fair value as part of the acquisition and record a corresponding liability. Under Canadian GAAP, any contingent consideration was not required to be recognized unless amounts were resolved and payable on the date of acquisition. On transition to IFRS, Husky recognized a liability of $85 million, based on the fair value of remaining upside interest payments, with an adjustment to opening retained earnings. For the year ended December 31, 2010, the Company recognized pre-tax accretion of $9 million in finance expenses under IFRS. Changes in forecast differentials used to determine the fair value of the remaining upside interest payments resulted in the recognition of a pre-tax gain of $41 million for the year ended December 31, 2010.transition when this would require undue use of hindsight.