Impacts of IFRSLunch and Learn

June 28, 2011June 28, 2011

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Project Update

IFRS decisions: All decisions have been made:

• 10 disclosure choices

• 14 policy choices OAG audit of the opening balance sheet complete Since April 1, 2011, IFRS has been adopted as the basis of

accounting for the Corporation

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IFRS Decision Summary

Choices Decisions

Total Prior Today Deferred

Applicable to CBC/ Radio-Canada 24

Disclosure choices (10) 10

Policy choices 14 14

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Policy Decisions

Standard Date Description Decision Made

IFRS 1 16-Sep-09 PP&E: Deemed Cost Election Deemed cost election on real estate land and buildings True IFRS cost on all other assets

IFRS 1 16-Sep-09 Decommissioning costs election Estimate the obligation at the transition date

IFRS 1 16-Sep-09 Borrowing costs election Apply IAS 23 from the transition date

IFRS 1 16-Sep-09 Application of IFRIC 4 Apply from the transition date (with assessment of pre-2005 leases)

IFRS 1 16-Sep-09 Business combinations Apply from the transition date

IFRS 1 12-Nov-09 Election for different transition date subsidiaries

Adopt CBC's transition date

IFRS 1 10-Mar-10 Financial instruments – designation No changes in designation from current Canadian GAAP

IFRS 1 10-Nov-10 Employee benefits - transition approach Fresh start approach

IAS 2 12-Nov-09 Inventory valuation methodology Value at average cost

IAS 16 16-Sep-09 PP&E post transition valuation methodology All asset classes on the cost basis

IAS 19 10-Nov-10 Accounting for actuarial gains and losses Use the Other Comprehensive Income (OCI) Approach

IAS 39 10-Mar-10 Financial instruments: Available-for-sale designation

No changes in designation from current Canadian GAAP

IAS 39 10-Mar-10 Financial instruments: Fair Value designation No changes in designation from current Canadian GAAP

IAS 40 12-Nov-09 Investment property valuation Value using the cost basis

Approved by the Audit CommitteeApproved by the Audit Committee

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Disclosure Decisions

Disclosure Type Standard Date Decision Made

Cash flow statement IAS 7 12-Nov-09 Net cash flow from operating activities determined by adjusting net profit

Cash flow statement IAS 7 12-Nov-09 Interest and dividends received to be shown as an investing cash flow

Cash flow statement IAS 7 12-Nov-09 Interest paid to be shown as a financing cash flow

Note Disclosure IAS 12 12-Nov-09 Tax – Reconciliation between tax expense and the product of accounting profit multiplied by the applicable tax rate

Note disclosure IAS 20 12-Nov-09 Grant income – Deferred capital funding will be disclosed gross from the capital asset to which it was provided

Note disclosure IAS 20 12-Nov-09 Grant income – Income funding will be disclosed as a credit to the income statement

Note disclosure IAS 21 12-Nov-09 The financial report will be reported in Canadian Dollars

Note disclosure IAS 1 10-Mar-10 Expenses classified by function

Cash flow statement IAS 7 10-Mar-10 The Indirect method will be used

Income statement IAS 1 23-Feb-11 Single statement of comprehensive income

Approved by the Audit CommitteeApproved by the Audit Committee

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Financial Impacts

The implementation of IFRS had financial impacts on the opening balance sheet in five areas:

1. Property and equipment

2. Pension plans and employee-related liabilities

3. Consolidation of the CBC Monetization Trust

4. Capitalization of Telesat satellite transponder lease

5. Allowance for doubtful accounts

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Property and Equipment

As a capital intensive organization, the implementation of IFRS had a significant impact on the accounting of our capital assets: Real-estate land and buildings were revalued to their fair

market value at transition resulting in an increase in our net book value of $162.4m

Real-estate buildings were parsed into five major components each with their own useful life for depreciation purposes

• Substructure 65 years• Shell 30 years• Interiors 20 years• Services 25 years• Building sitework 15 years

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Property and Equipment

Asset policy 2.3.02 updates: Componetization policy guidance added

Componentization methodology is based on ATSM Uniformat II Classification for Building Elements (E1557-97) major groups were noted before. More granular details also provided to assist in classification.

Derecognition guidance added Derecognition is only applicable for disposals of assets or

components > $100K (threshold) With componentization it can be difficult to determine the

original cost & A/D amounts to derecognize so a “proxy method” has been developed based on a current replacement value model. (Estimate original cost based on current value)

An Excel based tool has been developed to assist in calculation

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Property and Equipment

Asset policy 2.3.02 updates: Amortization assumptions must be be reviewed annually New processes implemented since April 1, 2010 with Capital

Process team Derecognition of assets Componentization for real-estate buildings Annual review of amortization rates* Annual review for impairment indicators*

* Process will be updated to perform tasks quarterly, where necessary

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Pension and Employee-Related Liabilities

The CBC/Radio-Canada Pension Plan is one of the most significant plans of any Canadian Crown Corporation

With the transition to IFRS, the actuarial valuation for accounting purposes was restated to reflect the new standard

Under IFRS, our actuarial liability decreased by $82.8m as of April 1, 2010.

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Monetization Trust

IFRS required the consolidation of the CBC Monetization Trust with CBC/Radio-Canada

From an IFRS reporting standpoint, the assets monetized in the Trust and removed from our financial statements were reinstated and the gains made on the transaction eliminated for consolidated reporting purposes

The resulting entry impacted various asset and liability accounts with an adjustment to reduce retained earnings by $5.5m

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Telesat Satellite Transponder Lease

Under IFRS, the criteria for the capitalization of a lease differ from that of Canadian GAAP.

Each significant lease was analyzed for classification as an operating lease or finance lease under IFRS. All classifications previously made remained unchanged with the

exception of our lease of seven satellite transponders from Telesat At April 1, 2010 the lease of the transponders was capitalized as

though it had always been accounted accordingly under IFRS: Capitalization of finance lease $ 119.9m Accumulated amortization (64.3m) Obligations under finance lease (73.0m) Opening retained earnings 17.4m

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IFRS finance leases

Terminology: IFRS uses the term “Finance Lease” not “Capital Lease”

IFRS does not evaluate leases based on the CGAAP “bright lines” (75% of life, 90% of fair value)

IFRS is subjective (“major” portion of the economic life, “substantially all” of the fair value)…no quantitative thresholds Lease analysis tool was developed to help with the

assessment Asset policy 2.3.02 has been updated. Capital lease policy

2.3.03 will likely be eliminated. IFRIC 4 / EIC-150 “Determining whether an Arrangement

contains a Lease” are aligned…no process change

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Allowance for Doubtful Accounts (AFDA)

AFDA provision is based on impairment guidance in IAS 39 – Financial Instruments

IFRS requires first doing an assessment to find evidence of impairment then determining impairment to recognize (allowance)

More detailed guidance has been added to Credit & Collection Policy 2.3.07 as to how assess (assessment of uncollectability) and then measure the AFDA to recognize (likelihood of uncollectability).

Process has already been used and policy change vetted by SSC.

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Training

Leases IFRIC 4 Ad-hoc as required/requested