ANNUAL REPORT 2011 - Connacher Oil and Gas

AR 2011
PG 80
26. Commitments
Capital expenditure commitments
As at December 31
2011 2010
(Canadian dollar in thousands)
Commitments relating to the acquisition of property, plant and equipment $ – $ 1,566
Service and maintenance commitments
The company is also contractually committed under certain contracts for the service and maintenance of facilities and equipment. The following table
provides the details of these commitments:
As at December 31
2011 2010
(Canadian dollar in thousands)
No later than 1 year $ 8,487 $ 4,104
Later than 1 year but no later than 5 years 20,584 12,171
Later than 5 years 16,800 38,702
Total commitments $ 45,871 $ 54,977
The primary service and maintenance commitment of the company included above relates to power infrastructure costs of $31.8 million as at
December 31, 2011.
27. First TIME ADOPTION of IFRS
As described in note 2, these are the company’s first consolidated financial statements prepared in accordance with IFRS. As a result, these
consolidated financial statements have been prepared in accordance with IFRS 1, “First–time Adoption of International Financial Reporting Standards”.
IFRS 1 requires the presentation of comparative information as at the January 1, 2010 (the “transition date”) and subsequent comparative periods
using the consistent and retrospective application of IFRS accounting policies. However, to assist with the transition, the provisions of IFRS 1 allow
for certain mandatory exceptions and optional exemptions from the requirement of retrospective application of accounting policies and standards on
first–time adoption of IFRS. Accordingly, these consolidated financial statements were prepared using the accounting policies stated in note 3 of the
consolidated financial statements and were retrospectively and consistently applied except where specific IFRS 1 mandatory exceptions and optional
exemptions required or permitted an alternative treatment upon transition to IFRS for first–time adopters. The significant mandatory exceptions and
optional exemptions applied under IFRS 1 in preparing these consolidated financial statements are set out below:
Deemed cost election for petroleum and natural gas properties
Under previous GAAP, the company followed the “full cost” method of accounting for petroleum and natural gas activities under which all costs directly
associated with the acquisition of, the exploration for, and the development of petroleum and natural gas reserves were capitalized on a country–
by–country cost centre basis. The company had one cost centre, Canada, for the upstream segment. Costs accumulated within this one cost centre
were depleted using the unit–of–production method based on proved reserves determined using estimated future prices and costs. Upon transition
to IFRS, the company was required to adopt new accounting policies for upstream activities, including the segregation of exploration and evaluation
costs and petroleum and natural gas properties. Under IFRS, exploration and evaluation costs are those expenditures for which technical feasibility
and commercial viability has not yet been determined, are presented separately on the balance sheet as exploration and evaluation assets and may
or may not be amortized based on the company’s accounting policy. Petroleum and natural gas properties include those expenditures where technical
feasibility and commercial viability has been determined, are presented as a part of property, plant and equipment on the balance sheet and are
depleted and depreciated on a segregated basis based on the company’s accounting policy. The company adopted the IFRS 1 exemption whereby the
company deemed its January 1, 2010 IFRS upstream asset costs to be equal to its previous GAAP historical upstream property, plant and equipment
net book value. Accordingly, exploration and evaluation costs were deemed equal to the unproved properties balance and the petroleum and natural
gas properties costs were deemed equal to the remaining upstream full cost pool balance. The petroleum and natural gas property costs were
allocated for depletion, depreciation and impairment testing purposes on a pro rata basis using proved reserves values at the transition date.
Leases
The company elected not to reassess whether an arrangement contained a lease under IFRIC 4, “Determining whether an Arrangement contains a
Lease”, for contracts that were assessed under previous GAAP.
Business combinations
IFRS 3, “Business Combinations” was not applied to business combinations that occurred before the transition date.
Borrowing costs
Borrowing costs directly attributable to the acquisition or construction of qualifying assets were not retrospectively restated prior to the transition date.