Financial Statements of - Shoppers Drug Mart

SHOPPERS DRUG MART CORPORATION
Notes to the Consolidated Financial Statements
(unaudited)
(in thousands of Canadian dollars, except per share data)
13. EXPLANATION OF TRANSITION TO IFRS (continued)
ii) Sale-leaseback Transactions
Under previous GAAP, the Company had deferred gains on sale-leaseback transactions and was
recognizing the gains in earnings over the lease term. Any losses were recognized in earnings
immediately. Under IFRS, when sale-leaseback transactions result in operating leases, gains or
losses on sale-leaseback transactions that are considered to be conducted at fair value are
recognized in earnings immediately. When sale-leaseback transactions result in financing leases
or if the gains or losses on sale-leaseback transactions arise on transactions that are not
considered to have been transacted at fair value, the gains are deferred and recognized over the
shorter of the lease term and the estimated useful life of the leased asset, while losses are
recognized in earnings immediately.
The following is the impact of adopting IAS 17, “Leases” (“IAS 17”), on the Company’s earnings
for the 52 weeks ended January 1, 2011 and 12 weeks ended March 27, 2010 and the Company’s
financial position as at January 1, 2011, March 27, 2010 and January 3, 2010 related to the
Company’s sale-leaseback transactions:
52 weeks ended
January 1,
12 weeks ended
March 27,
Net earnings impact
Operating and administrative expenses $
2011
10,906 $
2010
12,063
Income tax expense (2,029) (2,137)
Increase in net earnings $ 8,877 $ 9,926
As at
Balance sheet impact
Other long-term liabilities $
January 1,
2011
(18,242) $
March 27,
2010
(19,399) $
January 3,
2010
(7,336)
Deferred tax liabilities 3,446 3,554 1,417
Increase in retained earnings $ 14,796 $ 15,845 $ 5,919
iii) Rent Expense during the Fixturing Period
Under previous GAAP, the Company capitalized rent expense incurred during a store’s fixturing
period to leasehold improvements in property and equipment. Under IFRS, rent expense during
the fixturing period is no longer capitalized but, instead, is treated as occupancy expense, which is
presented as part of operating and administrative expenses on the consolidated statements of
earnings in the period in which the rent expense is incurred.
The following is the impact of adopting IAS 16, “Property, plant and equipment” (“IAS 16”), on
the Company’s earnings for the 52 weeks ended January 1, 2011 and 12 weeks ended March 27,
2010 and the Company’s financial position as at January 1, 2011, March 27, 2010 and January 3,
2010:
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