During the year ended March 31, , there were no changes in the approach to capital management. If the Payment would result in a debt to equity ratio exceeding , then the Payment will be based on the greatest amount that can be paid without causing the debt to equity ratio to exceed Effective December 12, , all sinking fund payment requirements on all new and outstanding debt have been removed. Floating rates are based on the effective rates at the balance sheet date and vary over time.
Such contracts are used to hedge the impact of interest rate changes on debt. Such contracts are primarily used to hedge foreign dollar principal and interest payments. The following discussion is limited to the nature and extent of risks arising from financial instruments, as defined under Section of the CICA Handbook. BC Hydro is exposed to credit risk related to cash and cash equivalents, sinking fund investments, and derivative instruments.
It is also exposed to credit risk related to accounts receivable arising from its day to day electricity and natural gas sales in and outside British Columbia.
Maximum credit risk with respect to financial assets is limited to the carrying amount presented on the balance sheet with the exception of U. The maximum credit risk exposure for these U. BC Hydro manages this risk through Board-approved credit risk management policies which contain limits and procedures to the selection of counterparties.
Exposures to credit risks are monitored on a regular basis. BC Hydro manages liquidity risk by forecasting cash flows to identify financing requirements and by maintaining committed credit facilities. BC Hydro does not believe that it will encounter difficulty in meeting its obligations associated with financial liabilities.
Market risk comprises three types of risk: currency risk, interest rate risk, and price risk, such as changes in commodity prices and equity values.
BC Hydro monitors its exposure to market fluctuations and may use derivative contracts to manage these risks, as it considers appropriate. Other than in its energy trading subsidiary Powerex, BC Hydro does not use derivative contracts for trading or speculative purposes. Currency Risk Currency risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
Energy commodity prices are also subject to currency risk as they are primarily denominated in U. In addition, all commodity derivatives and contracts priced in U. BC Hydro actively manages its currency risk through a number of Board-approved policy documents. BC Hydro uses cross currency swaps and forward foreign exchange purchase contracts to achieve and maintain the Board-approved U. Interest Rate Risk Interest rate risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
BC Hydro is exposed to changes in interest rates primarily through its variable rate debt and the active management of its debt portfolio including its related sinking fund assets and temporary investments.
BC Hydro Board-approved debt management strategies include maintaining a percentage of variable interest rate debt within a certain range.
BC Hydro enters into interest rate swaps to achieve and maintain the target range of variable interest rate debt. Commodity Price Risk BC Hydro is exposed to commodity price risk as fluctuations in electricity prices and natural gas prices could have a materially adverse effect on its financial condition. BC Hydro enters into derivative contracts to manage commodity price risk.
Risks are managed within defined limits that are regularly reviewed by the Board of Directors. Fair values can be determined by reference to last quoted prices in the most advantageous active market for that instrument. In the absence of an active market, fair values are determined based on valuation models or by reference to instruments with similar characteristics and risk profiles.
Fair values of financial instruments determined using valuation models require the use of assumptions. In determining these assumptions, external, readily observable market inputs are used when available.
In limited circumstances, input parameters that are not based on observable market data are used. The inputs used in determining fair value are characterized by using a hierarchy that prioritizes inputs based on the degree to which they are observable. The three levels of the fair value hierarchy are as follows: Level 1 are quoted prices unadjusted in active markets for identical assets and liabilities.
Level 2 inputs are those other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, as of the reporting date.
Level 3 inputs are those that are not based on observable market data. The net loss is recognized in trade revenue and expense. The Company believes that the use of reasonable alternative valuation input assumptions in the calculation of Level 3 fair values would not result in significantly different fair values. For loans and receivables, the carrying value approximates fair value and amortized cost due to the short term nature of these financial instruments. For available-for-sale financial assets, no amount has been recorded in other comprehensive income and no amount was removed from other comprehensive income and reported in net income for the period.
Furthermore, the magnitude of the notional amounts does not necessarily correlate to the carrying value or fair value of the commodity derivatives. Credit Risk Domestic Electricity Receivables A customer application and a credit check are required prior to initiation of services. For customers with no BC Hydro credit history, call centre agents ensure accounts are secured either by a credit bureau check, a cash security deposit, or a credit reference letter.
The value of domestic and trade accounts receivable, by age and the related provision for doubtful accounts are presented in the following tables. It is an assessment of the potential amount of domestic and trade accounts receivable which will not be paid by customers after the balance sheet date. The assessment is made by reference to age, status and risk of each receivable, current economic conditions, and historical information. There was no change in the allowance for doubtful accounts during the year.
The Company regularly uses standard master netting agreements that allow for netting of exposures and often include margining provisions. In addition, the Company has credit loss insurance that covers most credit exposure associated with transactions that are delivered in the United States. With respect to these financial assets, BC Hydro assigns credit limits for counterparties based on evaluations of their financial condition, net worth, regulatory environment, cost recovery mechanisms, credit ratings, and other credit criteria as deemed appropriate.
Credit limits and credit quality are monitored periodically and a detailed credit analysis is performed at least annually. Further, BC Hydro has tied a portion of its contracts to master agreements that require security in the form of cash or letters of credit if current net receivables and replacement cost exposure exceed contractually specified limits. Interest payments have been computed using contractual rates or, if floating, based on rates current at March 31, In respect of the cash flows in U.
It should be noted that cash flows associated with future energy sales and commodity contracts which are not considered financial instruments under Section are not included in this analysis, which is prepared in accordance with Section The regulatory account that captures all variances from forecasted finance charges as described in Note 5 eliminates any impact on net income.
This analysis assumes that all other variables, in particular interest rates, remain constant. Therefore a change in interest rates at March 31, would not affect net income or other comprehensive income with respect to these fixed rate instruments. Sensitivity analysis for variable rate non-derivative instruments and derivative instruments An increase or decrease of basis points in interest rates at March 31, would have no impact on net income and would have no material impact on other comprehensive income.
The Finance Charges regulatory account that captures all variances from forecasted finance charges as described in Note 5 eliminates any impact on net income.
This analysis assumes that all other variables, in particular foreign exchange rates, remain constant. As a result, BC Hydro has exposure to movements in commodity prices for commodities it trades, including electricity, natural gas and associated derivative products.
BC Hydro manages these exposures through its Board-approved risk management policies, which limit components of and overall market risk exposures, pre-define approved products and mandate regular reporting of exposures. VaR estimates the pre-tax forward trading loss that could result from changes in commodity prices, with a specific level of confidence, over a specific time period.
Powerex uses an industry standard Monte Carlo VaR model to determine the potential change in value of its forward trading portfolio over a day holding period, within a 95 per cent confidence level, resulting from normal market fluctuations. VaR as an estimate of price risk has several limitations. The VaR model uses historical information to determine potential future volatility, assuming that price movements in the past will be indicative of future price movements.
It cannot forecast unusual events such as extreme price movements. In addition, it is sometimes difficult to appropriately estimate the VaR associated with illiquid or non-standard products. As a result, Powerex uses additional measures to supplement the use of VaR to estimate price risk. These include the use of a Historic VaR methodology, weekly stress tests, notional limits for illiquid or emerging products, and independent reporting regarding non-standard options.
As described in Note 5, BC Hydro has applied for deferral of these costs. A range of discount rates between 3. Under these agreements, BC Hydro is required to deliver a predetermined amount of electricity each year for an year period ending in fiscal The amounts received under the Skagit River Agreements are deferred and included in income on an annuity basis over the electricity delivery period ending in fiscal Pension benefits are based on years of membership service and highest five-year average pensionable earnings.
Annual cost-of-living increases are provided to pensioners to the extent that funds are available in the indexing fund. Employees make basic and indexing contributions to the plan funds based on a percentage of current pensionable earnings. BC Hydro contributes amounts as prescribed by an independent actuary. BC Hydro is responsible for ensuring that the statutory pension plan has sufficient assets to pay the pension benefits upon retirement of employees.
The supplemental arrangements are unfunded. The most recent actuarial funding valuation for the statutory pension plan was performed at December 31, The next valuation for funding purposes will be prepared as at December 31, BC Hydro also provides post-retirement benefits other than pensions including medical, extended health and life insurance coverage for retirees who have at least 10 years of service and qualify to receive pension benefits. Certain benefits, including the short-term continuation of health care and life insurance, are provided to terminated employees or to survivors on the death of an employee.
These other post-retirement benefits and post-employment benefits are not funded. Post-employment benefits include the pay-out of benefits that vest or accumulate, such as banked vacation. The pension plan assets and obligations are measured as at December 31, The other benefit plan obligations are measured as at March 31, No valuation allowance was required in fiscal and fiscal No benefit plans were fully funded in fiscal or The expected return on plan assets is determined by considering long-term historical returns, future estimates of long-term investment returns and asset allocations.
Amounts are recorded in OCI until the criteria for recognition in the consolidated statement of operations are met. The remaining commitments are at predetermined prices.
Lease and Service Agreements BC Hydro has entered into various agreements to lease facilities or assets, or to purchase business support services.
Powerex has obtained dismissals of all but one of the lawsuits. In the remaining lawsuit, the California Department of Water Resources CDWR has claimed that it was forced under duress to enter into numerous transactions with Powerex in Powerex has obtained an indefinite stay of this remaining lawsuit pending resolution of related proceedings before the Federal Energy Regulatory Commission FERC. FERC has approved a settlement agreement between FERC staff and Powerex that acknowledged that there was no evidence that Powerex engaged in any gaming or other improper practices with any other market participants, and further noted that Powerex was a valuable and reliable supplier to the California market throughout the energy crisis.
FERC decided earlier in the proceedings that certain market-wide refunds will have to be paid by energy providers to various California parties. The precise amount has not been determined and the timing of the refunds is unknown. In addition, FERC has been ordered by the Ninth Circuit to reconsider additional refunds based on allegations of seller market manipulation and on quarterly reporting deficiencies.
CDWR transactions will be included in these latter inquiries. A FERC trial judge has determined that in the event Powerex and other energy providers improperly reported transactional data to FERC in and , those reports did not hide an accumulation of market power which resulted in unreasonably high energy prices. It is expected those receivables will be offset against any refunds that Powerex is required to pay.
Due to the ongoing nature of the regulatory and legal proceedings against Powerex, management cannot predict the outcomes of the claims against Powerex.
Powerex has recorded provisions for uncollectible amounts and legal costs associated with the California energy crisis. Management has not disclosed the provision amounts or ranges of expected outcomes due to the potentially adverse effect on the process.
For existing claims in respect of which settlement negotiations have advanced to the extent that potential settlement amounts can reasonably be predicted, management has recorded a provision for the potential costs of those settlements. Management has not disclosed the ranges of expected outcomes due to the potentially adverse effect on the negotiation process for these pending claims. It is not possible at this time to predict with any certainty the outcome of such litigation.
All transactions between BC Hydro and its related parties are considered to possess commercial substance and are consequently recorded at the exchange amount, which is the amount of consideration established and agreed to by the related parties. BC Hydro has not experienced any losses to date under this indemnity. The Act will set the foundation for a new future of electricity self-sufficiency powered by unprecedented investments in clean, renewable energy across the province.
The companies will be combined in the second quarter of fiscal with transition activities expected to continue through the balance of the fiscal year. Each agreement represented 1 to 18 months compensation. Ltd 69, Acklands-Grainger Inc. Turner Sales Ltd. Paving Co. Fisher Contracting A. Concrete Precast Prod. Nickerson Excavating A. Thomson Group A. Maintenance Plus Contracting Ltd.
ABB Inc. Abdul M. Accenture Inc. Al Bolger Consulting Services Inc. Kay Associates Inc. King 93, 89, Alan M. Allwest Reporting Ltd. Alouette River Mngt. Society Alpen Helicopters Ltd. Alpine Paving Ltd. Altair Lighting Altec Industries Ltd. Altoft Helicopter Services Ltd.
Aluma Systems Canada Inc. Argus Technologies Ltd. Ltd Andrew Sheret Ltd. Andre M. Alum-Tek Industries Ltd. Amacon Construction Ltd. Ltd 36, Annex Consulting Group Inc. Anritsu Electronics Ltd. Ansan Industries Ltd. Aon Reed Stenhouse Inc. Auditor risk assessment: Insights from the academic literature. Report of the Committee on Foundations of Accounting Measurement. Official releases: SAS Nos.
Special report: Fighting fraud. Including estimates of the future in today's financial statements. Strategic dependence and inherent risk assessments. Education for investigative and forensic accounting. Analytical approaches to audit risk: A survey and analysis. Why do audits fail? Evidence from Lincoln Savings and Loan. Separating facts from forecasts in financial statements. The business risk audit: Origins, obstacles and opportunities.
Judging the risk of financial instruments: Problems and potential remedies. The nature of accounting information reliability: Inferences from archival and experimental research. Fraud detection: A theoretical foundation. Evidence from auditors about managers' and auditors' earnings management decisions.
In the public interest. Specifically, the project will do the following: a.. This standard will also consider the need for additional guidance to reflect environmental changes e. Consider the need for additional guidance to reflect environmental changes e.
Undertake revisions to Section to harmonize with SAS 70 material for financial statement audits. Earlier application continues to be permitted.
Section - Reporting employee future benefits by not-for-profit organizations. This Section prescribes the accounting treatment for employee future benefits provided by a not-for-profit organization.
Earlier application permitted but only for all benefit plans. Section - Financial statement presentation by not-for-profit organizations. This Section establishes presentation and disclosure standards for financial statements of not-for-profit organizations. Section - Contributions — revenue recognition. This Section establishes standards for the recognition, measurement, presentation and disclosure of contributions, and related investment income, received by not-for-profit organizations.
Section - Contributions receivable. This Section establishes standards for the recognition and disclosure of contributions receivable by not-for-profit organizations. Section - Tangible capital assets held by not-for-profit organizations [Superseded]. This Section deals with accounting for tangible capital assets held by not-for-profit organizations. Section - Intangible assets held by not-for-profit organizations [Superseded].
This Section deals with accounting for intangible assets acquired or developed by a not-for-profit organization. Section - Tangible capital assets held by not-for-profit organizations.
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