accounting policy developments (Tables)

12 Months Ended

Dec. 31, 2018

Schedule of impact of IFRS 9 application on carrying amount of portfolio investments


	December 31, 2017						January 1, 2017
	As previously		IFRS 9		As currently		As previously		IFRS 9		As currently
As at (millions)	reported		effects		reported		reported		effects		reported
Classified as
Available-for-sale financial assets	$	41	$	(41)	$	—	$	62	$	(62)	$	—
Fair value through net income 1		—		20		20		—		41		41
Fair value through other comprehensive income		—		21		21		—		21		21
	$	41	$	—	$	41	$	62	$	—	$	62

Arising from the classification of investments as accounted for at fair value through net income under the new standard, as at December 31, 2017, $4 (January 1, 2017 – $3), net of income tax effects of $1 (January 1, 2017 – $1), has been adjusted to retained earnings from accumulated other comprehensive income.

Schedule of the impact of the application of IFRS 16 on the Consolidated statements of financial position


	Excluding
	effects of		IFRS 16
As at January 1, 2019 (billions)	IFRS 16		effects		Pro forma
Non-current assets
Property, plant and equipment, net	$	12.1	$	1.0	$	13.1
Current liabilities
Provisions	$	0.1	$	*	$	0.1
Current maturities of long-term debt	$	0.8	$	0.2	$	1.0
Non-current liabilities
Provisions	$	0.7	$	*	$	0.7
Long-term debt	$	13.3	$	1.1	$	14.4
Other long-term liabilities	$	0.7	$	*	$	0.7
Deferred income taxes	$	3.2	$	(0.1)	$	3.1
Owners’ equity
Retained earnings	$	4.5	$	(0.2)	$	4.3
Accumulated other comprehensive income	$	*	$	*	$	*
Non-controlling interests	$	0.1	$	*	$	0.1

* Amounts less than $0.1 billion.

Schedule of the impacts of application of IFRS 15 on the Consolidated statements of income and other comprehensive income

IFRS 15, Revenue from Contracts with Customers, affected our Consolidated statements of income and other comprehensive income as follows:


	2018						2017
	Excluding						Excluding
	effects of		IFRS 15		As currently		effects of		IFRS 15		As currently
Years ended December 31 (millions except per share amounts)	IFRS 15		effects		reported		IFRS 15		effects		reported
Operating revenues
Service	$	13,130	$	(1,248)	$	11,882	$	12,478	$	(1,146)	$	11,332
Equipment		792		1,421		2,213		724		1,249		1,973
Revenues arising from contracts with customers		13,922		173		14,095		13,202		103		13,305
Other operating income 1		273		—		273		103		—		103
		14,195		173		14,368		13,305		103		13,408
Operating expenses
Goods and services purchased		6,388		(20)		6,368		5,935		(31)		5,904
Employee benefits expense		2,906		(10)		2,896		2,595		(1)		2,594
Depreciation		1,669		—		1,669		1,617		—		1,617
Amortization of intangible assets		598		—		598		552		—		552
		11,561		(30)		11,531		10,699		(32)		10,667
Operating income		2,634		203		2,837		2,606		135		2,741
Financing costs		661		—		661		573		—		573
Income before income taxes		1,973		203		2,176		2,033		135		2,168
Income taxes		497		55		552		553		37		590
Net income		1,476		148		1,624		1,480		98		1,578
Other comprehensive income 1		284		—		284		(160)		—		(160)
Comprehensive income 1	$	1,760	$	148	$	1,908	$	1,320	$	98	$	1,418
Net income attributable to:
Common Shares	$	1,452	$	148	$	1,600	$	1,461	$	98	$	1,559
Non-controlling interests		24		—		24		19		—		19
	$	1,476	$	148	$	1,624	$	1,480	$	98	$	1,578
Comprehensive income attributable to:
Common Shares	$	1,750	$	148	$	1,898	$	1,297	$	98	$	1,395
Non-controlling interests		10		—		10		23		—		23
	$	1,760	$	148	$	1,908	$	1,320	$	98	$	1,418
Net income per Common Share
Basic	$	2.43	$	0.25	$	2.68	$	2.46	$	0.17	$	2.63
Diluted	$	2.43	$	0.25	$	2.68	$	2.46	$	0.17	$	2.63

For the year ended December 31, 2017, other operating income and the change in measurement of investment financial assets included within other comprehensive income increased and decreased, respectively, by $1 arising from the designation of financial assets as being accounted for either at fair value through net income or at fair value through other comprehensive income. Such designation of financial assets is required due to the retrospective implementation of IFRS 9, Financial Instruments.

The effects of the transition to IFRS 15 on the line items in the preceding table are set out below:


	Amount of IFRS 15 effect (increase
	(decrease) in millions except per share amounts)
	Allocation of transaction price (affecting timing of revenue recognition)
					Costs incurred to obtain or fulfill a contract with a customer
									Total
Years ended December 31	2018		2017		2018		2017		2018		2017
Operating revenues
Service	$	(1,248)	$	(1,146)	$	—	$	—	$	(1,248)	$	(1,146)
Equipment	$	1,421	$	1,249	$	—	$	—	$	1,421	$	1,249
Goods and services purchased	$	—	$	5	$	(20)	$	(36)	$	(20)	$	(31)
Employee benefits expense	$	—	$	—	$	(10)	$	(1)	$	(10)	$	(1)
Income taxes	$	47	$	27	$	8	$	10	$	55	$	37
Net income attributable to:
Common Shares	$	126	$	71	$	22	$	27	$	148	$	98
Net income per Common Share
Basic	$	0.21	$	0.12	$	0.04	$	0.05	$	0.25	$	0.17
Diluted	$	0.21	$	0.12	$	0.04	$	0.05	$	0.25	$	0.17

Previously, costs incurred to obtain or fulfill a contract with a customer were expensed as incurred. The new standard requires that such costs be capitalized and subsequently recognized as an expense over the life of the contract on a rational, systematic basis consistent with the pattern of the transfer of goods or services to which the asset relates.

This has the effect of reducing the costs recognized in the period arising from contracts with customers entered into during the period, offset by the amortization of capitalized costs arising from contracts with customers entered into in previous periods.

Previously, a “limitation cap” constrained the recognition of revenue in a multiple element arrangement to an amount that was not contingent upon either delivering additional items or meeting other specified performance conditions. The new standard requires that amounts contingently billable and collectible in the future be recognized currently as revenue to the extent we have currently satisfied our performance obligations to the customer; this is the new standard’s most significant effect on us.

For a contract with a customer, this has the effect of allocating more of the consideration to equipment revenue, which is recognized at the inception of the contract, and less to future service revenue.

Schedule of the impact of application of IFRS 15 on Consolidated statements of financial position

IFRS 15, Revenue from Contracts with Customers, affected our Consolidated statements of financial position as follows:


As at (millions)	December 31, 2018						December 31, 2017 1						January 1, 2017
	Excluding						Excluding						Excluding
	effects		IFRS 15		As currently		effects		IFRS 15		As currently		effects		IFRS 15		As currently
	of IFRS 15		effects		reported		of IFRS 15		effects		reported		of IFRS 15		effects		reported
ASSETS
Current assets
Cash and temporary investments, net	$	414	$	—	$	414	$	509	$	—	$	509	$	432	$	—	$	432
Accounts receivable		1,609		(9)		1,600		1,623		(9)		1,614		1,471		(9)		1,462
Income and other taxes receivable		3		—		3		96		—		96		9		—		9
Inventories		374		2		376		378		2		380		318		2		320
Contract assets		—		860		860		—		757		757		—		700		700
Prepaid expenses		278		261		539		260		233		493		233		210		443
Current derivative assets		49		—		49		18		—		18		11		—		11
		2,727		1,114		3,841		2,884		983		3,867		2,474		903		3,377
Non-current assets
Property, plant and equipment, net		12,091		—		12,091		11,368		—		11,368		10,464		—		10,464
Intangible assets, net		10,956		—		10,956		10,658		—		10,658		10,364		—		10,364
Goodwill, net		4,733		—		4,733		4,236		—		4,236		3,787		—		3,787
Contract assets		—		458		458		—		396		396		—		352		352
Other long-term assets		876		110		986		421		107		528		640		93		733
		28,656		568		29,224		26,683		503		27,186		25,255		445		25,700
	$	31,383	$	1,682	$	33,065	$	29,567	$	1,486	$	31,053	$	27,729	$	1,348	$	29,077
LIABILITIES AND OWNERS’ EQUITY
Current liabilities
Short-term borrowings	$	100	$	—	$	100	$	100	$	—	$	100	$	100	$	—	$	100
Accounts payable and accrued liabilities		2,570		—		2,570		2,460		—		2,460		2,330		—		2,330
Income and other taxes payable		218		—		218		34		—		34		37		—		37
Dividends payable		326		—		326		299		—		299		284		—		284
Advance billings and customer deposits		810		(157)		653		782		(150)		632		737		(153)		584
Provisions		129		—		129		78		—		78		124		—		124
Current maturities of long-term debt		836		—		836		1,404		—		1,404		1,327		—		1,327
Current derivative liabilities		9		—		9		33		—		33		12		—		12
		4,998		(157)		4,841		5,190		(150)		5,040		4,951		(153)		4,798
Non-current liabilities
Provisions		728		—		728		511		—		511		395		—		395
Long-term debt		13,265		—		13,265		12,256		—		12,256		11,604		—		11,604
Other long-term liabilities		738		—		738		847		—		847		736		—		736
Deferred income taxes		2,656		496		3,152		2,500		441		2,941		2,107		404		2,511
		17,387		496		17,883		16,114		441		16,555		14,842		404		15,246
Liabilities		22,385		339		22,724		21,304		291		21,595		19,793		251		20,044
Owners’ equity
Common equity		8,916		1,343		10,259		8,221		1,195		9,416		7,917		1,097		9,014
Non-controlling interests		82		—		82		42		—		42		19		—		19
		8,998		1,343		10,341		8,263		1,195		9,458		7,936		1,097		9,033
	$	31,383	$	1,682	$	33,065	$	29,567	$	1,486	$	31,053	$	27,729	$	1,348	$	29,077

Goodwill and non-current provisions have been adjusted as set out in Note 18(c).

The effects of the transition to IFRS 15 on the line items in the preceding table are set out below:


	Amount of IFRS 15 effect (increase (decrease) in millions)
	Allocation of transaction price (affecting timing of revenue recognition)
							Costs incurred to obtain or fulfill a contract with a customer
													Total
	Dec. 31,		Dec. 31,		Jan. 1,		Dec. 31,		Dec. 31,		Jan. 1,		Dec. 31,		Dec. 31,		Jan. 1,
As at	2018		2017		2017		2018		2017		2017		2018		2017		2017
Current assets
Accounts receivable	$	(9)	$	(9)	$	(9)	$	—	$	—	$	—	$	(9)	$	(9)	$	(9)
Inventories	$	2	$	2	$	2	$	—	$	—	$	—	$	2	$	2	$	2
Contract assets, net	$	860	$	757	$	700	$	—	$	—	$	—	$	860	$	757	$	700
Prepaid expenses and other	$	—	$	—	$	—	$	261	$	233	$	210	$	261	$	233	$	210
Non-current assets
Contract assets, net	$	458	$	396	$	352	$	—	$	—	$	—	$	458	$	396	$	352
Other long-term assets	$	—	$	—	$	—	$	110	$	107	$	93	$	110	$	107	$	93
Advance billings and customer deposits	$	(157)	$	(150)	$	(153)	$	—	$	—	$	—	$	(157)	$	(150)	$	(153)
Deferred income taxes	$	396	$	349	$	322	$	100	$	92	$	82	$	496	$	441	$	404
Retained earnings	$	1,072	$	947	$	876	$	271	$	248	$	221	$	1,343	$	1,195	$	1,097

Increases in the amount of costs capitalized in the period arising from contracts with customers entered into during the period are offset by the amortization of capitalized costs arising from contracts with customers entered into in previous periods.

The difference between the revenue recognized currently and the amount currently collected/collectible is recognized on the statement of financial position as a contract asset.

The contract asset recorded at January 1, 2017, represents revenues that will not be, and have not been, reflected at any time in our periodic results of operations, but would have been if not for the transition to the new standard; the effect of this “pulling forward” of revenues is expected to be somewhat muted by the composite ongoing inception, maturation and expiration of millions of multi-year contracts with our customers.

Schedule of the impact of application of IFRS 15 on Consolidated statements of cash flows


	2018						2017
	Excluding						Excluding
	effects of		IFRS 15		As currently		effects of		IFRS 15		As currently
Year ended December 31 (millions)	IFRS 15		effects		reported		IFRS 15		effects		reported
OPERATING ACTIVITIES
Net income 1	$	1,476	$	148	$	1,624	$	1,480	$	98	$	1,578
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		2,267		—		2,267		2,169		—		2,169
Deferred income taxes		19		55		74		430		37		467
Share-based compensation expense, net		6		—		6		17		—		17
Net employee defined benefit plans expense		95		—		95		82		—		82
Employer contributions to employee defined benefit plans		(53)		—		(53)		(67)		—		(67)
Non-current contract assets		—		(62)		(62)		—		(44)		(44)
Income from equity accounted investments		(170)		—		(170)		(4)		—		(4)
Shares settled from Treasury		100		—		100		—		—		—
Other 1		(76)		(3)		(79)		(18)		(14)		(32)
Net change in non-cash operating working capital		394		(138)		256		(142)		(77)		(219)
Cash provided by operating activities	$	4,058	$	—	$	4,058	$	3,947	$	—	$	3,947

For the year ended December 31, 2017, net income and other increased and decreased, respectively, by $1 arising from the designation of financial assets as being accounted for either at fair value through net income or at fair value through other comprehensive income. Such designation of financial assets is required due to the retrospective implementation of IFRS 9, Financial Instruments.