Annual Report - 2001 - ARC Resources Ltd.

PAGE 75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The application of US GAAP would have the following effect on the consolidated balance sheets as reported:
2001 2000
Canadian US Canadian US
GAAP GAAP GAAP GAAP
Property, plant and equipment $ 1,311,306$ 1,091,432$ 600,813 $ 511,200
Deferred foreign exchange translation loss 2,053 – – –
Deferred foreign exchange translation gain – – (1,106) –
Commodity and foreign currency contracts (13,107) 12,753 – –
Future income taxes (174,703) (155,083) – –
Unitholders’ capital (1,029,538) (1,038,849) (610,645) (615,482)
Accumulated earnings (283,575) (89,566) (142,887) (49,543)
Accumulated other comprehensive income – (8,251) – –
The above noted differences between Canadian GAAP and US GAAP are the result of the following:
(a)
(b)
(c)
The Trust performs a cost recovery ceiling test for each cost centre which limits net capitalized costs to the
undiscounted estimated future net revenue from proved oil and gas reserves plus the cost of unproved
properties less impairment, using year end prices or average prices in that year if appropriate. In addition,
the aggregate value of all cost centres is further limited by including financing costs, general and
administrative expenses, future removal and site restoration costs and income taxes. Under US GAAP,
companies using the full cost method of accounting for oil and gas producing activities perform a ceiling
test on each cost centre using discounted estimated future net revenue from proved oil and gas reserves
using a discount factor of 10 per cent. Prices used in the US GAAP ceiling tests are those in effect at year
end and financing and general and administrative expenses are excluded from the calculation. The amounts
recorded for depletion, and depreciation have been adjusted in the periods following the additional writedowns
taken under US GAAP to reflect the impact of the reduction of depletable costs.
US GAAP requires long-term debt denominated in foreign currencies to be translated at the rates of
exchange in effect at the balance sheet date, with inclusion of the resulting gain or loss in the net income for
the period. Canadian GAAP requires these gains or losses be deferred and amortized over the remaining
term of the long-term debt.
Under Canadian GAAP, compensation expense is not recognized for rights granted to or exercised by
employees, directors and long-term consultants of the Trust under its Trust Unit Incentive Rights Plan. For
US GAAP purposes, the Trust uses the intrinsic value method of accounting for rights issued to its
employees, directors and long-term consultants who meet the definition of employees. As the exercise price
of the rights is subject to downward revisions from time to time, the rights plan is a variable compensation
plan. Accordingly, compensation expense is determined as the excess of the market price over the exercise
price of the rights at the end of each reporting period and is deferred and recognized in income over the
vesting period of the rights.
ARC ENERGY TRUST AR 2001