ANNUAL REPORT 2011 - Connacher Oil and Gas

AR 2011
PG 88
The above adjustments changed the deferred tax liability as follows:
As at
January 1, 2010 December 31, 2010
(Canadian dollar in thousands)
Flow–through shares $ 7,555 $ 6,943
Capital loss on intercompany transaction (13,039) (12,653)
Discount on long–term debt – (875)
Foreign exchange impact on debt – 3,470
Capitalized Stock–based compensation – (4,001)
Reclassification (2,348) (4,497)
Change in deferred tax liability $ (7,832) $ (11,613)
Other items – In addition to the above items, the change in deferred tax liability on January 1, 2010 and as at and for the year ended December 31,
2010 reflects the change in temporary differences resulting from the adjustments on transition to IFRS as described above.
27.9 Debt
Under previous GAAP, the convertible debentures were treated as a compound financial instrument with a debt and equity component. Under IFRS,
the equity component is considered an embedded derivative. As permitted under IFRS, the company designated the convertible debentures as “fair
value through profit and loss” and accordingly, recorded convertible debentures at fair value at each reporting end with changes reported within net
earnings (loss). As a result, the equity portion of convertible debentures was reduced by $16.8 million with a corresponding increase to Retained
Earnings (Deficit) on January 1, 2010 and December 31, 2010. In addition, the company recognized the effect of change in fair value by increasing
the value of the convertible debentures by $3.6 million on January 1, 2010 with a corresponding increase to deficit. The adjustment also resulted in
an increase of finance charges in 2010.
27.10 Reclassifications
In order to comply with the presentation of net earnings (loss) adopted by the company under IFRS, in the downstream segment, the company
classified $3.9 million from operating expenses to general and administrative expenses in 2010.
Further, under previous GAAP, the unwinding of the discount on decommissioning liabilities was included as a part of depletion, depreciation and
accretion expense in the consolidated statements of operations and comprehensive loss. Under IFRS this amount totaling $2.9 million in 2010 has
been reclassified to finance charges.
27.11 Changes to the Statement of Cash flow
The following is a reconciliation of the company’s cash flow from operating, investing and financing activities reported in accordance with previous
GAAP to IFRS for the year ended December 31, 2010:
Year ended December 31
2010
(Canadian dollar in thousands)
Cash flow from operating activities under previous GAAP $ 10,785
Exploration and evaluation expenses (964)
Interest expense on long-term debt 55,637
Change in working capital relating to interest expense on long-term debt 974
Cash flow from operating activities under IFRS $ 66,432
Cash flow used in investing activities under previous GAAP $ (269,763)
Exploration and evaluation expenses 964
Interest capitalized on long-term debt 35,408
Cash flow used in investing activities under IFRS (233,391)
Cash flow from financing activities under previous GAAP $ 25,793
Interest expense paid (92,019)
Cash flow used in financing activities under IFRS $ (66,226)
Under previous GAAP, interest expense on long-term debt was reported as a part of operating activities. Under IFRS, the company has elected to
present interest payments on long-term debt in financing activities.
27.12 Loss per share
Basic and diluted loss per share under IFRS were impacted by the IFRS adjustments discussed above.